Markets Today: Stock Indexes Slightly Lower as Bond Yields Climb

Rich Asplund - Barchart - Tue Mar 28, 2023

Morning Markets

March S&P 500 futures (ESM23) this morning are down -0.16%, and March Nasdaq 100 E-Mini futures (NQM23) are down -0.13%.

U.S. stock index futures this morning are slightly lower. Higher T-note yields today are weighing on the overall market, along with today’s news on U.S. inventories. Bank stocks are steady to slightly higher as hopes of more support from U.S. authorities lifted sentiment toward the banking sector. Also, a rally in WTI crude oil to a 2-week high today is boosting energy stocks.

U.S. Feb wholesale inventories unexpectedly rose +0.2% m/m versus expectations of a -0.2% m/m decline. Also, Feb retail inventories rose +0.8% m/m, more than expectations of +0.2% m/m and the largest increase in 6 months. The inventory build is bearish for stocks since companies may need to cut back on production due to the higher unsold stocks.

Some positive corporate news is bullish for stocks. PVH surged more than +11% in pre-market trading after reporting stronger-than-expected Q4 revenue and forecasting 2024 revenue above the consensus. Also, Walgreens Boots Alliance is up more than +2% after reporting better-than-expected Q2 sales. In addition, McCormick is up more than +3% after reporting Q4 adjusted EPS above consensus and forecasting full-year adjusted EPS above estimates.

Global bond yields are higher today on reduced fears about the banking sector. The 10-year T-note yield is up +0.8 bp at 3.537%. Also, the 10-year German bund yield is up +4.4 bp at 2.272%, and the 10-year UK gilt yield is up +5.8 bp at 3.424%.

Overseas stock markets are mixed. The Euro Stoxx 50 today is up +0.08%. China’s Shanghai Composite stock index closed down -0.19% and Japan’s Nikkei Stock Index closed up +0.15%.

The Euro Stoxx 50 index today is modestly higher. Gains in energy stocks, miners, and automakers are leading the overall market higher. An unexpected increase in Italy's March consumer confidence to a 13-month high is also supportive for stocks. European bank stocks are mixed. Higher European government bond yields are limiting the upside in stocks, with the 10-year German bund yield up +4.4 bp at 2.272%.

ECB Governing Council member Muller said, "with inflation risks still skewed to the upside, there's probably room to raise interest rates."

Italy’s March consumer confidence index unexpectedly rose +1.1 to a 13-month high of 105.1, stronger than expectations of no change at 104.0.

China’s Shanghai Composite today posted modest losses. Concerns that the Chinese government will crack down on domestic businesses weighed on stocks after China’s Central Commission for Discipline Inspection said late Monday that it will carry out checks on more than 30 companies for graft and corruption. Losses in the overall market were limited as Chinese chemical companies rallied after Rongsheng Petrochemical said it is selling about a 10% stake to Saudi Aramco. Also, Chinese stocks tied to tourism rose after the Ministry of Culture and Tourism said that banks are encouraged to support the sector's development. The market may also garner support after Alibaba Group Holding announced after Tuesday’s close that it plans to split its $220 billion business into six main units encompassing e-commerce, media, and the cloud.

Japan’s Nikkei Stock Index today rose to a 2-week high and closed moderately higher. An easing of the U.S. and European bank turmoil sparked a rally in Japanese bank stocks today. Also, Japanese-based suppliers to the electric vehicle (EV) sector advanced today after the U.S. agreed to boost cooperation with Japan on critical supply chains for the EV market and allow EVs that use materials that have been collected or processed in Japan to be eligible for incentives under the U.S. Inflation Reduction Act. In addition, stocks and the yen rose after Japan's cabinet approved the use of 2.2 trillion yen in reserve funds from the fiscal 2022 budget for measures to cushion the impact of inflation.

Pre-Market U.S. Stock Movers

First Republic Bank (FRC) is up more than +3% in pre-market trading to extend Monday’s rebound, as hopes of more support from U.S. authorities lifted sentiment toward the banking sector.

PVH (PVH) surged more than +11% in pre-market trading after reporting Q4 revenue of $2.49 billion, stronger than the consensus of $2.36 billion, and forecasting 2024 revenue to increase 3%-4% compared to 2%-3% in 2022.

Lyft (LYFT) climbed more than +5% in pre-market trading after appointing David Risher as CEO and reaffirming Q1 guidance.

Occidental Petroleum (OXY) rose more than +2% in pre-market trading after a regulatory filing showed top holder Berkshire Hathaway bought 3.7 million common shares of the stock from March 23 to March 27.

Energy stocks and energy service providers are climbing in pre-market trading after WTI crude oil today extended Monday’s advance to a 2-week high. ConocoPhillips (COP), Devon Energy (DVN), Haliburton (HAL), Marathon Oil (MRO), Schlumberger (SLB), and Valero Energy (VLO) are up more than +1%.

Alibaba Group Holding (BABA) jumped more than +9% in pre-market trading after announcing plans to split the company into six units that will individually explore IPOs.

Ciena Corp (CIEN) rose more than +3% in pre-market trading after Raymond James upgraded the stock to strong buy from outperform.

Walgreens Boots Alliance (WBA) climbed more than +2% in pre-market trading after reporting Q2 sales of $24.86 billion, better than the consensus of $33.57 billion.

Paramount Global (PARA) rallied more than +4% in pre-market trading after Bank of America upgraded the stock to buy from neutral.

McCormick (MKC) rose more than +3% in pre-market trading after reporting Q4 adjusted EPS of 59 cents, better than the consensus of 49 cents, and forecast full-year adjusted EPS of $2.56-$2.61, the midpoint above the consensus of $2.57.

Invesco Mortgage (IVR) tumbled more than -8% in pre-market trading after cutting its cash dividend to 40 cents per share from 65 cents per share to “retain capital.”

Albemarle (ALB) slid more than-2% in pre-market trading after Liontown Resources rejected an unsolicited, conditional, and non-binding indicative proposal from Albemarle.

Today’s U.S. Earnings Reports (3/28/2023)

Core & Main Inc (CNM), Jefferies Financial Group Inc (JEF), Lululemon Athletica Inc (LULU), McCormick & Co Inc/MD (MKC), Micron Technology Inc (MU), nCino Inc (NCNO), TD SYNNEX Corp (SNX), Walgreens Boots Alliance Inc (WBA).

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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.