Stocks Slump as Yields Climb on Signs of an Aggressive Fed

What you need to know…

The S&P 500 Index ($SPX) (SPY) this morning is down -1.64%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -1.15%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -2.28%.

U.S. stocks this morning are sharply lower, with the S&P 500 falling to a 2-1/ 2week low, the Dow Jones Industrials dropping to a 2-week low, and the Nasdaq 100 sliding to a 2-1/2 month low.  Today, a jump in T-note yields is undercutting technology stocks and leading the overall market lower after the 10-year T-note yield climbed to a nearly 2-year high today at 1.806%.  Hawkish comments today from Richmond Fed President Barkin pushed T-note yields higher when he said he "certainly" thinks a Fed rate hike in March is conceivable. 

Comments today from Richmond Fed President Barkin were bearish for stocks when he said he "certainly" thinks it's conceivable that the Fed will be able to raise interest rates at the March FOMC meeting.

The U.S. 7-day average of new U.S. Covid infections rose to a record 708,323 on Sunday, up +79% since Jan 1.

Today’s stock movers…

Weakness in technology stocks today is a drag on the overall market.  Tesla (TSLA) and Nvidia (NVDA) are down more than -4%, and Mega Platforms (FB), Illumina (ILMN), Advanced Micro Devices (AMD), and Xilinx (XLNX) are all down more than -3%. 

Take-Two Interactive (TTWO) is down more than -12% today to lead losers in the S&P 500 after it said it would acquire Zynga for about $11 billion.  Zynga (ZNGA) is up +46% on the news. 

Cardinal Health (CAH) is down more than -10% today after it said inflation and supply chain constraints could cut adjusted EPS by as much as -45 cents in fiscal 2022.

Dexcom (DXCM) is down more than -5% today after it forecast full-year 2022 revenue of $2.82 billion to $2.94 billion, weaker than the consensus of $3 billion.

Lululemon (LULU) is down more than -4% today after it said it sees Q4 net revenue at the low end of its $2.13 billion to $2.17 billion forecasted range, below the consensus of $2.17 billion. 

Airbnb (ABNB) is down more than -6% today to lead loser in the Nasdaq 100 after Piper Sandler cut its recommendation on the stock to neutral from overweight.

Nike (NKE) is down more than -4% today to lead losers in the Dow Jones Industrials after HSBC cut its recommendation on the stock to hold from buy. 

Moderna (MRNA) is up more than +2% to lead gainers in the S&P 500 and Nasdaq 100 after it said it had signed vaccine purchase agreements worth $18.5 billion for this year, along with options for another $3.5 billion.

Across the markets…

March 10-year T-notes (ZNH22) this morning are down -8 ticks, and the 10-year T-note yield is up +3.7 bp at 1.799%.  Mar T-notes dropped to a nearly 2-1/2 year nearest-futures low today, and the 10-year T-note yield climbed to a nearly 2-year high of 1.806%.  The likelihood that the Fed may begin raising interest rates as soon as the Mar FOMC meeting is undercutting T-note prices today.  Also, supply pressures are weighing on T-note prices as the Treasury will auction $110 billion of T-notes and T-bonds this week, beginning with Tuesday’s auction of $56 billion in 3-year T-notes.

The dollar index (DXY00) this morning is up +0.52%.  Higher T-note yields are supporting gains in the dollar after the 10-year T-note yield rose to a nearly 2-year high today.  Also, hawkish comments from Richmond Fed President Barkin helped push the dollar higher today when he said he "certainly" thinks it's conceivable that the Fed will raise interest rates at the March FOMC meeting. 

EUR/USD (^EURUSD) is down -0.58%.  Dollar strength today is undercutting EUR/USD along with divergent central bank policies with the Fed currently tapering QE and expected to raise interest rates well before the ECB.

USD/JPY (^USDJPY) is down -0.24% today.  A slump in stocks today is boosting the safe-haven demand for the yen.  Forex trading in USF/JPY is muted, with Japanese markets closed today for a holiday.  The upside in the yen may be limited after the 10-year T-note yield climbed to a nearly 2-yer high today. 

February gold (GCG22) this morning is down -5.9 (-0.33%), and March silver (SIH22) is down -0.109 (-0.49%).  Precious metals this morning are moderately lower.  Dollar strength is undercutting metals today.  Also, soaring global bond yields are weighing on gold prices after the 10-year T-note yield rose to a nearly 2-year high and the 10-year German bund yield climbed to a 2-1/2 year high.  Precious metals do have some safe-haven support today from weakness in stocks.