Stocks Under Pressure as Bond Yields Climb

Rich Asplund - Barchart - Fri Mar 15, 10:37AM CDT

The S&P 500 Index ($SPX) (SPY) this morning is down -0.41%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.16%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.82%.

Stocks this morning are moderately lower, with the Nasdaq 100 falling to a 1-1/2 week low. Inflation concerns undercut T-note prices, pushed yields higher, and weighed on stocks as the 10-year T-note yield climbed to a 2-week high after today’s economic news showed the US Feb import price index ex-petroleum unexpectedly increased. That added to this week’s disappointing CPI and PPI reports, bolstering expectations for the Fed to delay interest rate cuts further.

Some negative corporate news today is also weighing on the overall market. Jabil is down more than -14% after cutting its full-year core EPS forecast. Also, Adobe is down more than -13% after forecasting Q2 revenue below consensus. In addition, chipmakers are sliding after Bloomberg reported that the Chinese government asked electric vehicle makers to sharply increase purchases from local auto chipmakers.

Market volatility may also lead to unexpected swings in stock prices on today’s quarterly expiration of March derivatives tied to stocks, index options, and futures, known as triple witching. About $5.3 trillion of options are set to expire today.

The US Mar Empire manufacturing survey of general business conditions index fell -18.5 to -20.9, weaker than expectations of -7.0.

The US Feb import price index ex-petroleum unexpectedly rose +0.2% m/m, stronger than expectations of -0.2% m/m.

US Feb manufacturing production rose +0.8% m/m, stronger than expectations of +0.3% m/m and the biggest increase in 10 months.

The University of Michigan US Mar consumer sentiment index unexpectedly fell -0.4 to 76.5, weaker than expectations of an increase to 79.7.

The markets are discounting the chances for a -25 bp rate cut at 1% for next week's March 19-20 FOMC meeting, 11% for the following meeting on April 30-May 1, and 61% for the meeting after that on June 11-12.

Overseas stock markets today are mixed. The Euro Stoxx 50 is up +0.42%. China's Shanghai Composite closed up +0.54%. Japan's Nikkei Stock Index closed down -0.26%.

Interest Rates

June 10-year T-notes (ZNM24) this morning are down -5 ticks. The 10-year T-note yield is up +1.2 bp at 4.302%. June T-notes fell to a 2-week low today, and the 10-year T-note yield climbed to a 2-week high of 4.318%. T-note prices were undercut by today’s unexpected increase in the Feb import price index ex-petroleum, adding to this week’s disappointing PPI and CPI reports. Also, today’s stronger-than-expected US Feb manufacturing production report was hawkish for Fed policy and bearish for T-notes. Higher European government bond yields are also weighing on T-note prices.

European government bond yields are higher. The 10-year German bund yield rose to a 2-week high of 2.454% and is up +1.2 bp at 2.438%. The 10-year UK gilt yield rose to a 1-1/2 week high of 4.125% and is up +1.7 bp at 4.107%.

US Stock Movers

Jabil (JBL) is down more than -14% to lead losers in the S&P 500 after cutting its full-year core EPS forecast to $8.40 from a previous forecast of above $9.00, well below the consensus of $8.99.

Adobe (ADBE) is down more than -13% to lead losers in the Nasdaq 100 after forecasting Q2 revenue of $5.25 billion-$5.30 billion, weaker than the % to lead losers in the S&P 500 consensus of $5.31 billion.

Ulta Beauty (ULTA) is down more than -5% even after reporting Q4 net sales of $3.6 billion, better than the consensus of $3.523 billion after Oppenheimer said the results fell short of “even more bullish expectations.”

Abbot Laboratories (ABT) is down more than -1% after a US jury ordered Mead Johnson to pay out $60 million to the mother of a premature baby that died from intestinal disease after being fed Enfamil baby formula. Baby formula accounts for about 10% of Abbot’s business.

Mega-cap technology stocks are moving lower today and weighing on the overall market. Amazon.com (AMZN), Alphabet (GOOGL), Apple (AAPL), and Microsoft (MSFT) are down more than -1%.

Chip makers are under pressure today, as Bloomberg reported that the Chinese government asked electric vehicle makers to sharply increase purchases from local auto chipmakers. As a result, ON Semiconductors (ON) and NXP Semiconductors NV (NXPI) are down more than -2%. Also, Texas Instruments (TXN), Analog Devices (ADI), and Qualcomm (QCOM) are down more than -1%.

Salesforce (CRM) is down more than -1% to lead losers in the Dow Jones Industrials on signs of insider selling after an SEC filing showed CEO Benioff sold $4.59 million of shares on Wednesday.

Smartsheet (SMAR) is down more than -5% after forecasting 2025 revenue of $1.11 billion-$1.12 billion, below the consensus of $1.14 billion.

Costar Group (CSGP) is up more than +4% to lead gainers in the S&P 500 and the Nasdaq 100 after the National Association of Realtors agreed to a $418 million deal to settle litigation over commission rules for US real estate agents.

Valero Energy (VLO) is up more than +3% after Bank of America upgraded the stock to buy from neutral with a price target of $210.

Rivian Automotive (RIVN) is up more than +3% after Piper Sandler upgraded the stock to overweight from neutral with a price target of $21.

Paccar (PCAR) and Cummins (CMI) are up more than +2% after UBS upgraded both stocks to buy from neutral with a price target of $136 for Paccar and a price target of $321 for Cummins.

Micron Technology (MU) is up more than +2% after Citigroup raised its price target on the stock to $150 from $95.

Marathon Petroleum (MPC) is up more than +2% after Bank of America Global Research raised its price target on the stock to $225 from $185.

Steel Dynamics (STLD) is up more than +3% after forecasting Q1 EPS of $3.51-$3.55, stronger than the consensus of $3.32.

Intuitive Surgical (ISRG) is up more than +2% after the FDA approved the company’s da Vinci 5, the next-generation multiport robotic system.

Stellantis NV (STLA) is up more than +3% after Piper Sander named the stock a favorite auto name and initiated coverage of the stock with an overweight rating.

Madrigal Pharmaceuticals (MDGL) is up more than +13% after the FDA approved its Rezdiffra drug to treat patients with nonalcoholic steatohepatitis.

Earnings Reports (3/15/2024)

Jabil Inc (JBL).

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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.