Stocks Recover Early Losses as Bond Yields Fall

The S&P 500 Index ($SPX) (SPY) today is up +0.22%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.19%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.27%.  March E-mini S&P futures (ESH25) are down -0.14%, and March E-mini Nasdaq futures (NQH25) are down -0.20%. 

Stock indexes today recovered from early losses and moved slightly higher on falling bond yields.  The 10-year T-note yield dropped to a 1-week low today on speculation the Fed remains on a path to lower interest rates.  Stocks also found support today after US weekly jobless claims rose less than expected and the Mar Philadelphia Fed business outlook survey fell less than expected.

Stocks today initially moved lower on concerns about the economic outlook due to US trade policies.  Stagflation concerns are also undercutting stocks after the FOMC cut its 2025 US GDP forecast on Wednesday and raised its 2025 inflation forecast.  Stock indexes were also undercut after European stocks fell today when ECB President Lagarde said US tariffs had raised uncertainty over the economic outlook.  Stock index futures recovered from their worst levels 

US weekly initial unemployment claims rose +3,000 to 223,000, showing a slightly stronger labor market than expectations of 224,000.

The US Mar Philadelphia Fed business outlook survey fell -5.6 to 12.5, stronger than expectations of 9.0.

Geopolitical risks in the Middle East are negative for stocks. Israel on Tuesday launched a series of airstrikes across Gaza, ending a two-month ceasefire with Hamas, and Israeli Prime Minister Netanyahu vowed to act “with increasing military strength” to free hostages and disarm Hamas.  Also, the US launched weekend strikes on Yemen’s Houthi rebels.  US Defense Secretary Hegseth said strikes would be “unrelenting” until the group stops attacking vessels in the Red Sea.  The Houthi rebels said they would respond by attacking US vessels in the Red Sea. 

Stocks have been under pressure over the past two weeks due to fears that US tariffs will weaken economic growth and corporate earnings.  On March 4, President Trump imposed 25% tariffs on Canadian and Mexican goods and doubled the tariff on Chinese goods to 20% from 10%.  On Sunday, Mr. Trump reiterated that he would impose reciprocal tariffs and additional sector-specific tariffs on foreign nations on April 2. 

The markets are discounting the chances at 21% for a -25 bp rate cut after the May 6-7 FOMC meeting.

Overseas stock markets today are lower.  The Euro Stoxx 50 fell from a 2-week high and is down -1.07%.  China’s Shanghai Composite Index closed down -0.51%.  Japan’s Nikkei Stock 225 did not trade today, with markets closed in Japan for the Vernal Equinox Day holiday.

Interest Rates

June 10-year T-notes (ZNM25) today are up +15 ticks.  The 10-year T-note yield is down -6.9 bp to 4.174%.  June T-notes today rallied to a 1-week high, and the 10-year T-note yield fell to a 1-week low of 4.172%.  T-notes are climbing today on carryover support from Wednesday when the FOMC cut its US 2025 GDP forecast and raised its year-end unemployment rate forecast, dovish factors for Fed policy.  Also, the FOMC said it would slow the pace of runoff of its balance sheet starting next month, another dovish factor for Fed policy.  In addition, T-notes have carryover support from today’s rally in 10-year UK gilts to a 2-week high.

European bond yields Wednesday moved lower.  The 10-year German bund yield is down -4.4 bp to 2.759%.  The 10-year UK gilt yield fell to a 2-week low of 4.559% and is down -5.2 bp to 4.578%.

German Feb PPI fell -0.2% m/m and rose +0.7% y/y, weaker than expectations of +0.2% m/m and +1.0% y/y.

ECB President Lagarde said while the process of disinflation remains “well on track,” the ECB is unable to make firm commitments on interest rates due to elevated unpredictability over trade.

As expected, the Bank of England (BOE) kept its official bank rate unchanged at 4.50% and said a “gradual and careful” approach to monetary policy easing is appropriate.

Swaps are discounting the chances at 60% for a -25 bp rate cut by the ECB at the April 17 policy meeting.

US Stock Movers

ProAssurance (PRA) is up more than +48% after Doctors Co. acquired the company for about $1.3 billion or $25 per share. 

Darden Restaurants (DRI) is up more than +6% to lead gainers in the S&P 500 after forecasting full-year comparable sales up +1.5o%, better than the consensus of +1.29%.

Jabil (JBL) is up more than +5% after reporting Q2 net revenue of $6.73 billion, above the consensus of $6.42 billion, and forecast Q3 net revenue of $6.70 billion-$7.30 billion, the midpoint above the consensus of $6.77 billion.

Five Below (FIVE) is up more than +6% after reporting Q4 net sales of $1.39 billion, better than the consensus of $1.38 billion, and forecast 2026 net sales of $4.21 billion-$4.33 billion, the midpoint above the consensus of $4.25 billion. 

Carvana (CVNA) is up more than +4% after Piper Sandler upgraded the stock to overweight from neutral with a price target of $225. 

Cava Group (CAVA) is up more than +3% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $110. 

Freeport-McMoRan (FCX) is up more than +1% after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $52.

Accenture Plc (ACN) is down more than -9% to lead losers in the S&P 500 after narrowing its full-year operating margins forecast to 15.6% to 15.7% from a previous estimate of 15.6% to 15.8%.

Weakness in chip stocks is weighing on the broader market today, with Microchip Technology (MCHP) down more than -4% to lead losers in the Nasdaq 100 after it launched an underwritten public offering of $1.35 billion in depositary shares.  Also, NXP Semiconductors NV (NXPI), Analog Devices (ADI), ON Semiconductor (ON), GlobalFoundries (GFS), Broadcom (AVGO), and Texas Instruments (TXN) are down more than -1%. 

Rivian Automotive (RIVN) is down more than -3% after Piper Sandler downgraded the stock to neutral from overweight. 

Aramark (ARMK) is down more than -3% on negative carryover from a -16% slump in peer Sodexo after it issued a profit warning due to challenges, including weaker growth in North America in both health care and education.   

Polaris Inc (PII) is down more than -2% after Citigroup downgraded the stock to sell from neutral with a price target of $33.

Shoe Carnival (SCVL) is down more than -1% after reporting Q4 net sales of $262.9 million, weaker than the consensus of $281.5 million, and forecast 2026 net sales of $1.15 billion-$1.23 billion, below the consensus of $1.29 billion.   

 Earnings Reports (3/20/2025)

Accenture PLC (ACN), Darden Restaurants Inc (DRI), FactSet Research Systems Inc (FDS), FedEx Corp (FDX), Jabil Inc (JBL), Lennar Corp (LEN), Micron Technology Inc (MU), NIKE Inc (NKE).