The S&P 500 Index ($SPX) (SPY) this morning is down -0.05%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.06%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.28%.

Stock indexes this morning are mixed as they consolidate below last week’s record highs.  The markets are looking ahead to this week’s U.S. economic news, including Feb consumer confidence on Tuesday, revised Q4 GDP on Wednesday, and the Jan core personal consumption expenditures price index, the Fed’s preferred inflation gauge, on Thursday. 

U.S. economic news this morning was mixed.  Jan new home sales rose +1.5% to 661,000, weaker than expectations of 684,000. Conversely, the Feb Dallas Fed manufacturing activity outlook survey rose +16.1 to -11.3, stronger than expectations of -15.0.

The markets are discounting the chances for a -25 bp rate cut at 3% for the March 19-20 FOMC meeting and 19% for the following meeting on April 30-May 1.

Overseas stock markets are mixed.  The Euro Stoxx 50 is down -0.15%.  China’s Shanghai Composite closed down -0.93%.  Japan’s Nikkei Stock Index closed up +0.35%.

Interest Rates

March 10-year T-notes (ZNH24) this morning are down -4 ticks, and the 10-year T-note yield is up +3.5 bp at 4.283%.  March T-notes this morning gave up an early advance and turned lower, and the 10-year T-note yield recovered from a 1-week low of 4.215% and is higher.  T-notes are weighed down by negative carryover from weakness in European government bonds after hawkish ECB comments pushed yields higher. 

T-notes are also being undercut today by supply pressures as the Treasury later today will auction $63 billion 2-year T-notes and $64 billion 5-year T-notes as part of this week’s auction schedule of $169 billion of T-notes.  Also, about $60 billion of corporate debt is expected to be issued this week, prompting bond dealers to sell T-notes as a hedge against the incoming supply. 

Losses in T-notes are limited by anticipation of month-end rebalancing of bond indexes, which may spur the buying of longer-dated Treasuries by bond fund managers who need to balance the duration of their portfolios. 

European government bond yields this morning are higher.  The 10-year German bund yield rebounded from fell to a 1-week low of 2.346% and is up +5.9 bp at 2.422%.  The 10-year UK gilt yield rose to a 1-1/2 week high of 4.156% and is up +11.2 bp at 4.149%.

ECB President Lagarde said, "We are not there yet on inflation.  We need to get to 2% sustainably." 

ECB Governing Council member Stournaras said any monetary policy adjustments by the ECB must be gradual, and he sees the ECB's first rate cut in June.

ECB Governing Council member Mahlouf said the ECB shouldn't rush into a decision to cut interest rates but remain "very vigilant" of risks that wages might be rising at too fast a clip."

U.S. Stock Movers

Insulet (PODD) is down more than -5% to lead losers in the S&P 500, adding to last Friday’s -6% decline after forecasting 2024 revenue growth weaker than consensus.

Moderna (MRNA) is down more than -4% to lead losers in the Nasdaq 100 after HSBC downgraded the stock to reduce from hold. 

Newmont Corp (NEM) is down more than -3% after Argus Research downgraded the stock to hold from buy. 

Mining stocks are on the defensive today after iron ore prices fell more than -3% to a 4-month low on concerns about Chinese demand.  As a result, Freeport McMoRan (FCX) is down more than -2%, and ArcelorMittal (MT) is down more than -1%. 

Alphabet (GOOGL) is down more than -2% after Melius said the company’s missteps in AI, like last week’s pause of image generation for its Gemini AI model, may fuel the perception the company is an unreliable source for AI, posing a risk to its search business.

Alcoa (AA) is down more than -3% after making a $2.2 billion offer to acquire Alumina Ltd. 

International Paper (IP) is down more than -1% after Argus Research downgraded the stock to hold from buy.

PDD Holdings (PDD) is down more than -1% after The Information reported that U.S. lawmakers are demanding a Temu shipment ban due to forced labor concerns.

Palo Alto Networks (PANW) is up more than +8% to lead gainers in the S&P 500 and Nasdaq 100 after a Barron’s article over the weekend said the company is expanding its software offerings to include more services for customers and will allow customers to switch from competitors without charging for the period covered by existing contracts, potentially causing collateral damage through the security software sector. 

Domino’s Pizza (DPZ) is up more than +6% after reporting Q4 total domestic store comparable sales growth rose +2.8%, stronger than the consensus of $2.2%. 

Micron Technology (MU) is up more than +5% after announcing it began volume production of its HBN3E Solution chip for AI applications.

Illumina (ILMN) is up more than +2% on signs of insider buying after an SEC filing showed CEO Thaysen bought $991,672 of shares last Thursday.

Salesforce (CRM) is up more than +2% to lead gainers in the Dow Jones Industrials after Citigroup raised its price target on the stock to $325 from $265.

HashiCorp (HCP) is up more than +11% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $30. 

Amer Sports (AS) is up more than +3% after Goldman Sachs initiated coverage of the stock with a buy recommendation and a price target of $21. 

Earnings Reports (2/26/2024)

AES Corp/The (AES), Domino's Pizza Inc (DPZ), Elanco Animal Health Inc (ELAN), Fidelity National Information (FIS), Freshpet Inc (FRPT), HEICO Corp (HEI), ONEOK Inc (OKE), Pilgrim's Pride Corp (PPC), Playtika Holding Corp (PLTK), Public Service Enterprise Grou (PEG), SBA Communications Corp (SBAC), Trex Co Inc (TREX), Unity Software Inc (U), Workday Inc (WDAY), Zoom Video Communications Inc (ZM).

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