Stocks Slip on Mixed Corporate Earnings Results and Higher Bond Yields

Rich Asplund - Barchart - Fri Apr 21, 2023

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.30%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.20%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.39%.

U.S. stock indexes this morning are moderately lower, with the Nasdaq 100 falling to a 1-week low. Mixed corporate earnings results today are pressuring stock indexes. Also, higher T-note yields today are weighing on technology stocks. T-note yields rose after a gauge of U.S manufacturing activity unexpectedly expanded by the most in 6 months.

Global bond yields are mostly higher. The 10-year T-note yield is up +3.1 bp at 3.562%. The 10-year German bund yield is up +3.6 bp at 2.482%. The 10-year UK gilt yield is little changed at 3.761%. The markets are showing an 88% chance of a 25 bp rate hike by the Federal Reserve at the May 2-3 FOMC meeting and have fully priced in a 25 bp rate hike by the ECB at its May 4 ECB meeting.

The Apr S&P U.S. manufacturing PMI unexpectedly rose +1.2 to 50.4, stronger than expectations of a decline to 49.0 and its strongest pace of expansion in 6 months.

On the bearish side for stocks, W R Berkley is down more than -9% after reporting Q1 adjusted operating EPS below consensus. Also, Freeport-McMoRan is down more than -4% after iron ore prices fell to a 4-month low and copper prices fell to a 1-week low. In addition, Schlumberger is down more than -3% after reporting Q1 cash flow from operations that was well below consensus.

On the positive side, healthcare service stocks are climbing today, led by a +5% jump in HCA Healthcare after it reported better-than-expected Q1 EPS and raised guidance on full-year EPS. Also, Procter & Gamble is up more than +3% after reporting stronger-than-expected Q3 net sales and raising its full-year organic revenue forecast. In addition, CSX is up more than +3% after reporting Q1 revenue above consensus.

Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.48%. China’s Shanghai Composite closed down -1.95%, and Japan’s Nikkei Stock Index closed down -0.33%.

Today’s stock movers…

W R Berkley (WRB) is down more than -9% to lead losers in the S&P 500 after reporting Q1 adjusted operating EPS of $1.00, below the consensus if $1.23.

Autoliv (ALV) is down more than -6% after reporting Q1 adjusted EPS of 90 cents, weaker than the consensus of 92 cents.

Freeport-McMoRan (FCX) is down more than -4% after iron ore prices fell to a 4-month low and copper prices fell to a 1-week low.

Albemarle (ALB) is down more than -3% after Chile’s government unveiled plans where the state will partner with companies in lithium mining projects.

Schlumberger (SLB) is down more than -3% after reporting Q1 cash flow from operations of $330 million, well below the consensus of $660.8 million.

Regions Financial (RF) is down more than -2% after reporting Q1 adjusted revenue of $1.95 billion, weaker than the consensus of $1.96 billion, and Q1 total deposits fell -3% q/q to $129.04 billion.

Seagate Technology Holdings Plc (STX) is down more than -2% after Morgan Stanley downgraded the stock to equal weight from overweight.

Healthcare service stocks are climbing today, led by HCA Healthcare (HCA), which is up more than +5% to lead gainers in the S&P 500 after reporting Q1 EPS of $4.85, stronger than the consensus of $4.14, and raising guidance on full-year EPS to $17.25-$18.55 from a previous projection of $16.40-$17.60. Also, Tenet Healthcare (THC) is up more than +5%, Universal Health Services (UHS) is up more than +4% , and Community Health Systems (CYH) is up more than +1%.

Procter & Gamble (PG) is up more than +3% to lead gainers in the Dow Jones Industrials after reporting Q3 net sales of $20.07 billion, above the consensus of $19.34 billion, and raised its full-year organic revenue forecast to up +6% from a prior view of up +4-5%, stronger than the consensus of +5.39%.

CSX (CSX) is up more than +3% to lead gainers in the Nasdaq 100 after reporting Q1 revenue of $3.71 billion, above the consensus of $3.59 billion.

AT&T (T) is up more than +4% after HSBC upgraded the stock to buy from hold with a price target of $21.

Pool Corp (POOL) is up more than +2% after Stephens upgraded the stock to overweight from equal weight, saying a return to top-line growth in the second half of the year is “quite possible.”

Amazon.com (AMZN) is up more than +2% after company announced it will eliminate hundreds of corporate jobs as part of a reorganization.

Across the markets…

June 10-year T-notes (ZNM23) today are down -6 ticks, and the 10-year T-note yield is up +3.2 bp at 3.564%. June T-notes this morning erased an early advance and turned lower after today’s Apr S&P U.S. manufacturing PMI unexpectedly showed manufacturing activity expanded at its strongest pace in 6 months. T-note prices are also lower on negative carryover from a slide in European government bond prices on hawkish ECB comments.

The dollar index (DXY00) today is up by +0.27%. The dollar is moving moderately higher after today’s news that the Apr S&P U.S. manufacturing PMI unexpectedly expanded by the most in 6 months. Also, higher T-note yields today are supportive of the dollar.

EUR/USD (^EURUSD) today is down by -0.01%. The euro today is slightly lower on strength in the dollar. Also, today’s news that showed the Apr S&P Eurozone manufacturing PMI unexpectedly contracted by the most in nearly 3 years weighed on the euro. Losses in EUR/USD are limited by hawkish comments from ECB Vice President Guindos and ECB Governing Council member Makhlouf.

The Apr S&P Eurozone manufacturing PMI unexpectedly fell -1.8 to 45.5, weaker than expectations of an increase to 48.0 and the weakest report in nearly three years. However, the Apr S&P Eurozone composite PMI rose +0.7 to an 11-month high of 54.4, stronger than expectations of no change at 53.7.

Hawkish ECB comments today are bullish for EUR/USD. ECB Vice President Guindos said, "Core inflation remains very sticky" and may be more persistent than markets had anticipated. Also, ECB Governing Council member Makhlouf said it is too early for the ECB to plan a pause in tightening, and interest rates need to continue at "restrictive levels."

USD/JPY (^USDJPY) today is up by +0.01%. The yen today gave up overnight gains and is little changed. Rising T-note yields today have sparked long liquidation in the yen. The yen today initially moved higher after Japanese economic news showed that Japan’s Mar national CPI ex-food and energy rose more than expected and by the most in 41 years.

The Japan Apr Jibun Bank manufacturing PMI rose +0.3 to a 6-month high of 49.5.

The Japan Mar national CPI ex-food and energy rose +3.8% y/y, stronger than expectations of +3.6% y/y and the largest increase in 41 years.

June gold (GCM3) this morning is down -25.9 (-1.28%), and May silver (SIK23) is down -0.123 (-0.48%). Precious metals prices this morning are moderately lower. A stronger dollar today is weighing on metals prices. Also, higher global bond yields are bearish for metals. In addition, hawkish comments today from ECB Governing Council member Makhlouf weighed on metals when he said it's too early for the ECB to plan a pause in tightening. Silver prices are also moving lower on negative carryover from a slump in iron ore prices today to a 4-month low and a drop in copper prices to a 1-week low.

More Stock Market News from Barchart

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.