The S&P 500 Index ($SPX) (SPY) Thursday closed down -1.23%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -1.35%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.55%. 

Stocks on Thursday gave up an early advance and sold off, with the S&P 500 and Nasdaq 100 dropping to 2-week lows and the Dow Jones Industrials falling to a 2-1/2 week low.  Hawkish Fed comments Thursday weighed in stocks after Philadelphia Fed President Harker said “inflation is still too high,” and Minneapolis Fed President Kashkari said Fed rate cuts may not be needed this year if progress on inflation stalls. 

Stocks initially opened higher Thursday on positive carryover from Wednesday when Fed Chair Powell reiterated his expectation that it will likely be appropriate to begin lowering interest rates “at some point this year.”  Stocks also found support after T-note yields turned lower when US weekly jobless claims rose more than expected to a 2-month high, a dovish factor for Fed policy.

US weekly initial unemployment claims rose +9,000 to a 2-month high of 221,000, showing a weaker labor market than expectations of 214,000.

The US Feb trade deficit of -$68.9 billion was wider than expectations of -$67.6 billion and was the largest deficit in 10 months, a negative factor for Q1 GDP.

Minneapolis Fed President Kashkari said, "In March, I jotted down two rate cuts this year if inflation continues to fall back towards our 2% target.  If we continue to see inflation moving sideways, then that would make me question whether we needed to do those rate cuts at all."

Chicago Fed President Goolsbee said that higher-than-expected inflation readings from the start of the year likely don't change the broader picture of cooling price growth and that economic activity right now does not resemble traditional overheating of demand.

Richmond Fed President Barkin said it's "smart" for the Fed to take time to gain greater clarity about the inflation trajectory before lowering interest rates.

In a hawkish comment, Philadelphia Fed President Harker said, "We're not where we need to be; inflation is still too high."

The markets are discounting the chances for a -25 bp rate cut at 12% for the next FOMC meeting on April 30-May 1 and 73% for the following meeting on June 11-12.

Overseas stock markets on Thursday settled higher.  The Euro Stoxx 50 closed up +0.03%.  China's Shanghai Composite was closed for the Tomb Sweeping Day holiday.  Japan's Nikkei Stock Index closed up +0.81%.

Interest Rates

June 10-year T-notes (ZNM24) on Thursday closed up +10.5 ticks.  The 10-year T-note yield fell -2.6 bp to 4.321%.  June T-note prices Thursday recovered from early losses and moved higher.  Short-covering emerged in T-notes after Thursday’s weekly US initial unemployment claims report rose more than expected to a 2-month high, a dovish factor for Fed policy. Also, Thursday’s US Feb trade deficit widened to a 10-month high, which was negative for Q1 GDP and supportive for T-notes.  In addition, safe-haven demand for T-notes increased after stocks retreated.

Hawkish Fed comments limited gains in T-notes.  Philadelphia Fed President Harker said, “Inflation is still too high.”  Also, Richmond Fed President Barkin said it's "smart" for the Fed to take time before cutting rates.  In addition, Minneapolis Fed President Kashkari said the Fed may not cut rates this year if progress on inflation stalls. 

European government bond yields Thursday moved lower.  The 10-year German bund yield fell -3.4 bp to 2.361%.  The 10-year UK gilt yield fell -3.5 bp to 4.021%.

Eurozone Feb PPI fell -1.0% m/m and -8.3% y/y, weaker than Jan’s -0.9% m/m and -8.0% y/y.

The Eurozone Mar S&P Composite PMI was revised upward by +0.4 to 50.3 from 49.9, the highest level in 10 months.

In the account of the March 6-7 ECB meeting, ECB officials said, "While it was wise to await incoming data and evidence, the case for considering rate cuts was strengthening," and the date of a first rate-cut is now "coming more clearly into view."

US Stock Movers

Lamb Weston Holdings (LW) closed down more than -19% to lead losers in the S&P 500 after reporting Q3 net sales of $1.46 billion, below the consensus of $1.65 billion, and cut its full-year net sales estimate to $6.54 billion-$6.60 billion from a previous forecast of $6.8 billion-$7.0 billion. 

Paramount Global (PARA) closed down more than -8% after several analysts expressed doubt about the company’s potential deal to merge with Skydance Media. 

AbbVie (ABBV) closed down more than -5% after cutting its full-year EPS forecast to $10.97-$11.17 from a previous estimate of $11.05-$11.25.

Chip stocks gave up early gains and sold off on hawkish Fed comments, which weighed on the overall market.  Advanced Micro Devices closed down more than -8% to lead losers in the Nasdaq 100.  Also, Nvidia (NVDA), Micron Technology (MU), Marvell Technology (MRVL), Broadcom (AVGO), Lam Research (LRCX), ASML Holding NV (ASML), and Qualcomm (QCOM) closed down more than -2%. 

Salesforce (CRM) closed down more than -3% to lead losers in the Dow Jones Industrials on signs of insider selling after an SEC filing showed CEO Benioff sold $4.51 million of shares on Tuesday.

Alphabet (GOOGL) closed down more than -2% after the Financial Times reported the company is considering charging for new “premium” features run by artificial intelligence.

Block (SQ) closed down more than -6% after Morgan Stanley downgraded the stock to underweight from equal weight with a price target of $60. 

Celanese (CE) closed down more than -4% after JPMorgan Chase downgraded the stock to underweight from neutral with a price target of $160.

Conagra Brands (CAG) closed up more than +5% to lead gainers in the S&P 500 after reporting Q3 adjusted operating margin of 16.4%, better than the consensus of 15.7%, and raising its full-year operating margin estimate to 15.8% from a prior view of 15.6%. 

Defense stocks rallied Thursday on rising tensions in the Middle East. L3Harris Technologies (LHX) closed up more than +2%.  Also, RTX Corp (RTX) and Lockheed Martin (LMT) closed up more than +1%.

Levi Strauss & Co (LEVI) closed up more than +12% after reporting Q1 adjusted EPS of 26 cents, stronger than the consensus of 21 cents, and raising its full-year adjusted EPS estimate to $1.17-$1.27 from a previous estimate of $1.15-$1.25. 

MacroGenics (MGNX) closed up more than +29% after Stifel said preliminary safety data from a mid-stage trial of MacroGenics’ Tamarack drug for the treatment of patients with prostate cancer appears to be a “better/best-case scenario.” 

Defensive packaged food makers rose Thursday on a decline in the broader market.  As a result, Campbell Soup (CPB), Tyson Foods (TSN), and General Mills (GIS) closed up more than +2%.  Also, Kellanova (K), Bunge Global (BG), and Hormel Foods (HRL) closed up more than +1%.

General Electric (GE) closed up more than +1% after Vertical Research Partners initiated coverage on the stock with a buy recommendation and a price target of $160.

Earnings Reports (4/5/2024)

CXApp Inc (CXAI), DZS Inc (DZSI), Greenbrier Cos Inc/The (GBX), Maxeon Solar Technologies Ltd (MAXN).

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