Stocks Recover Early Losses and Close Higher as Magnificent Seven Stocks Rebound

The S&P 500 Index ($SPX) (SPY) Friday closed up +0.08%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.08%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.39%.  June E-mini S&P futures (ESM25) are up +0.08%, and June E-mini Nasdaq futures (NQM25) are up +0.39%. 

Stock indexes on Friday recovered from early losses and closed slightly higher as a rally in the Magnificent Seven stocks sparked short covering in the broader market.  On Friday, stocks initially moved lower due to underwhelming forecasts from FedEx, Micron Technology, and Nike. 

FedEx, considered an economic barometer, closed down more than -6% as it cut its profit outlook, citing cost pressures and weaker demand. Also, Micron Technology closed down more than -8% to lead chip stocks lower after forecasting Q3 adjusted gross margin below consensus.  In addition, Nike closed down over -5%, blaming tariffs and geopolitics for its earnings woes. The downbeat earnings results add to concerns over the global economic outlook ahead of President Trump's April 2 deadline for a series of broad reciprocal tariffs.

Hawkish Fed comments on Friday pushed T-note yields slightly higher. New York Fed President Williams said, "The current modestly restrictive stance of the Fed's monetary policy is entirely appropriate given the solid labor market and inflation still running somewhat above our 2% goal."  Also, Chicago Fed President Goolsbee signaled he favors steady Fed policy when he said there's a lot of strength in the hard economic data and the Fed needs to be a steady hand and take the long view.

Market volatility was higher than normal Friday due to the expiration of nearly $4.5 trillion of March options and futures contracts tied to stocks, indexes, and exchange-traded funds in an event known as "triple-witching." The event has caused sudden price movements in the past as contracts disappear and traders roll over existing positions.

Heightened 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 continues to launch 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 on Friday settled lower.  The Euro Stoxx 50 closed down -0.50%.  China's Shanghai Composite Index fell to a 1-week low and closed down -1.29%.  Japan's Nikkei Stock 225 closed down -0.20%.

Interest Rates

June 10-year T-notes (ZNM25) Friday closed down -2.5 ticks.  The 10-year T-note yield rose +0.9 bp to 4.246%.  June T-notes Friday gave up an early advance and turned lower on hawkish Fed comments after New York Fed President Williams and Chicago Fed President Goolsbee signaled their support for steady Fed policy.  T-notes on Friday initially moved higher as weakness in stocks boosted safe-haven demand for T-notes.  Also, the strength of 10-year German bunds Friday provided carryover support to T-notes. 

European bond yields on Friday were mixed.  The 10-year German bund yield fell -1.5 bp to 2.765%.  The 10-year UK gilt yield rose +6.7 bp at 4.712%.

The Eurozone Mar consumer confidence index unexpectedly fell -0.9 to -14.5, weaker than expectations of an increase to -13.0.

ECB Governing Council member Stournaras said, "Everything points in the direction of an ECB rate cut in April," although it's too early to say for certain that such a move will happen.

Swaps are discounting the chances at 59% for a -25 bp rate cut by the ECB at the April 17 policy meeting.

US Stock Movers

The rebound of the Magnificent Seven stocks Friday led to a recovery in the overall market.  Tesla (TSLA) closed up more than +5% to lead gainers in the Nasdaq 100.  Also, Apple (AAPL), Meta Platforms (META), and Microsoft (MSFT) closed up more than +1%.  In addition, Alphabet (GOOGL) closed up +0.73%, and Amazon.com (AMZN) closed up +0.65%. 

Alnylam Pharmaceuticals (ALNY) closed up more than +11% after winning expanded approval for its heart drug, Amvuttra, to treat transthyretin amyloid cardiomyopathy. 

Super Micro Computer (SMCI) closed up more than +7% to lead gainers in the S&P 500 after JPMorgan Chase upgraded the stock to neutral from underweight. 

Boeing (BA) closed up more than +3% to lead gainers in the Dow Jones Industrials after the US government picked it over rival Lockheed Martin to build the next-generation US fighter jet.

Norwegian Cruise Line Holdings (NCLH) closed up more than +1% after Morgan Stanley upgraded the stock to equal weight from underweight with a price target of $22.

Micron Technology (MU) closed down more than -8% to lead chip stocks lower and losers in the S&P 500 and Nasdaq 100 after forecasting Q3 adjusted gross margin of 35.5% to 37.5%, the midpoint below the consensus of 37.4%.  Also, Lam Research (LRCX) and ASML Holding NV (ASML) closed down more than -2%.  In addition, Applied Materials (AMAT), KLA Corp (KLAC), Nvidia (NVDA), and NXP Semiconductors NV (NXPI) closed down more than -1%. 

FedEx (FDX) closed down more than -6% to lead losers as it cut its full-year earnings guidance for the third consecutive quarter, citing inflation and demand concerns.  The company cut its full-year adjusted EPS forecast to $18.00-$18.60 from a previous estimate of $19.00-$20.00, weaker than the consensus of $18.95.

Nike (NKE) closed down more than -5% to lead losers in the Dow Jones Industrials after the CFO said it sees digital traffic down double digits in fiscal 2026, and its inventory remains elevated across categories, citing tariffs on products from China and Mexico.

Lennar Corp (LEN) closed down more than -4% to lead homebuilders lower after reporting Q1 home sales gross margins of 18.7% versus 21.8% y/y.  It also forecasts Q2 new orders of 22,500 to 23,500, weaker than the consensus of 23,800.  Also, PulteGroup (PHM) closed down more than -2%, and DR Horton (DHI) and Toll Brothers (TOL) closed down more than -1%.

Valmont Industries (VMI) closed down more than -1% after William Blair & Co. downgraded the stock to market perform from outperform. 

Nucor (NUE) closed down more than -5% after forecasting Q1 adjusted EPS of 50 cents to 60 cents, well below the consensus of $1.07.

Lockheed Martin (LMT) closed down more than -4% after the US government picked rival Boeing to build the next-generation US fighter jet.

Earnings Reports (3/24/2025)

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