Stocks Recover on Reduced Uncertainty after FOMC Meeting

What you need to know…

The S&P 500 Index ($SPX) (SPY) this morning is up +1.62%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +1.61%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.48%. 

U.S. stock indexes are moving moderately higher today on optimism about the economic outlook and on relief that yesterday’s FOMC results are out of the way.  Mostly positive quarterly earnings results today are pushing stocks higher, along with better-than-expected U.S. economic data.  

The Euro Stoxx 50 index is up by +0.88% and provides carry-over support to U.S. stocks. A rally in bank stocks is leading European stocks higher today after Deutsche Bank AG raised its outlook.  European stocks also found some support on an improvement in German consumer confidence after the German Feb GfK consumer confidence unexpectedly rose +0.2 to -6.7, stronger than expectations of -8.0.

Today’s U.S. economic data was mixed for stocks.  On the positive side, U.S. weekly initial unemployment claims fell -26,000 to 260,000, showing a stronger labor market than expectations of 265,000.  Also, U.S. Q4 GDP rose 6.9% (q/q annualized), stronger than expectations of 5.5% and the fastest pace of expansion in five quarters. On the negative side, Dec capital goods orders nondefense ex-aircraft, a proxy for capital spending, was unchanged m/m, weaker than expectations of +0.4% m/m.  Also, Dec pending home sales fell -3.8% m/m, weaker than expectations of -0.4% m/m and the biggest decline in 8 months.

Today’s stock movers…

Seagate Technology (STX) is surging +19% today to lead gainers in the S&P 500 after it reported Q2 adjusted EPS of $2.41, better than the consensus of $2.35. 

ServiceNow (NOW) jumped more than +10% after it reported Q4 adjusted EPS of $1.46, above the consensus of $1.43.

Netflix (NFLX) is up more than +6% today after Pershing Square Capital Management said it purchased 3.1 million shares of the stock.

Xilinx (XLNX) is up more than +7% today to lead gainers in the Nasdaq 100 after it reported Q3 adjusted EPS of $1.29, well above the consensus of $1.02.

Dow Inc (DOW)  is up more than +5% today to lead gainers in the Dow Jones Industrials after it reported Q4 bet sales of $14.36 billion, better than the consensus of $14.29 billion.

Intel (INTC) is down more than -6% today to lead losers in the Dow Jones Industrials and Nasdaq 100 after it forecast Q1 adjusted EPS of 80 cents, below the consensus of 86 cents.

Teradyne (TER) is down more than -22% today to lead losers in the S&P 500 after it forecast Q1 adjusted EPS of 76-98 cents, well below the consensus of $1.27. 

Lam Research (LRCX) is down more than -3% today after it reported Q2 revenue of $4.23 billion, below the consensus of $4.41 billion, and forecast Q3 revenue of $4.25 billion +/- $300 million, weaker than the consensus of $4.51 billion.

Across the markets…

March 10-year T-notes (ZNH22) this morning are down -3 ticks, and the 10-year T-note yield is down -0.4 bp at 1.824%.  T-note prices are slightly lower today on strength in stocks along with better-than-expected U.S. economic data on weekly jobless claims and Q4 GDP.  T-notes also have negative carry-over from Wednesday’s hawkish tilt from Fed Chair Powell, who said he could not rule out a rate hike at every FOMC meeting.  Finally, T-notes are seeing supply pressures ahead of today’s sale of $53 billion of 7-year T-notes, which will conclude this week’s $188 auction package of T-notes and floating-rate notes. 

The dollar index (DXY00) this morning is up +0.72% and rallied to a 1-1/2 year high.  The dollar is climbing today on carry-over support from Wednesday when Fed Chair Powell said he favors a Fed rate hike in March.  Also, stronger-than-expected U.S. economic data today is fueling gains in the dollar. 

EUR/USD (^EURUSD) this morning is down -0.73% and dropped to a 1-1/2 year low.  Dollar strength is undercutting EUR/USD today, along with dovish comments from ECB Governing Council member Kazimir who said inflation in the Eurozone should be peaking in the coming months as the supply-side situation shows signs of stabilization and the problems with the delivery of components should be solved during the year.  A positive for the euro was today’s news that the German Feb GfK consumer confidence index unexpectedly rose +0.2 to -6.7, stronger than expectations of -8.0.

USD/JPY (^USDJPY) this morning is up +0.60% and posted a 2-week high. Central bank divergence is weighing on the yen today after Fed Chair Powell on Wednesday signaled support for Fed rate hikes to begin in March while the BOJ maintains QE and record low-interest rates. 

February gold (GCG22) this morning is down -23.8 (-1.30%), and March silver (SIH22) is down -0.857 (-3.60%).  Precious metals this morning are moderately lower, with gold falling to a 2-1/2 week low and silver dropping to a 2-week low.  Gold is lower on today’s rally in the dollar index to a 1-1/2 year high and on carry-over weakness from Fed Chair Powell’s hawkish comments on Wednesday.  Also, strength in stocks today has undercut the safe-haven demand for precious metals.