Stocks Slide on Higher Bond Yields and Triple Witching

Rich Asplund - Barchart - Fri Mar 15, 9:20AM CDT

The S&P 500 Index ($SPX) (SPY) this morning is down -0.62%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.36%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.91%.

Stocks this morning gave up overnight gains and are moving lower with the Nasdaq 100 falling to a 1-1/2 week low. Inflation concerns are undercutting T-note prices, pushing yields higher and weighing 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 reports on US consumer and producer prices, bolstering expectations for the Fed to delay interest rate cuts further.

Some negative corporate news today is also weighing on the overall market. Adobe is down more than -13% after forecasting Q2 revenue below consensus. Also, Jabil is down more than -13% after cutting its full-year core EPS forecast. 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 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 +0.55%. 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 -6 ticks. The 10-year T-note yield is up +2.6 bp at 4.316%. 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

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

Jabil (JBL) is down more than -13% 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.

Ulta Beauty (ULTA) is down more than -8% 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.”

Chip makers are under pressure today after Bloomberg reported that the Chinese government asked electric-vehicle makers to increase purchases from local auto chipmakers sharply. As a result, ON Semiconductors (ON) and NXP Semiconductors NV (NXPI) are down more than -2%. Also, Nvidia (NVDA), 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 -7% after forecasting 2025 revenue of $1.11 billion-$1.12 billion, below the consensus of $1.14 billion.

Bitcoin (^BTCUSD) is down more than -3% today and is weighing on crypto-related stocks. Coinbase Global (COIN), MicroStrategy (MSTR), Marathon Digital (MARA), and Riot Platforms (RIOT) are down -1% or more.

Steel Dynamics (STLD) is up more than +2% to lead gainers in the S&P 500 after forecasting Q1 EPS of $3.51-$3.55, stronger than the consensus of $3.32.

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.

Valero Energy (VLO) is up more than +2% after Bank of America upgraded the stock to buy from neutral with a price target of $210.

Micron Technology (MU) is up more than +2% to lead gainers in the Nasdaq 100 after Citigroup raised its price target on the stock to $150 from $95.

Rivian Automotive (RIVN) is up more than +4% after Piper Sandler upgraded the stock to overweight from neutral with a price target of $21.

Thor Industries (THO) is up more than +1% after Citigroup upgraded the stock to buy from neutral with a price target of $122.

Stellantis NV (STLA) is up more than +2% 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 +18% after its Rezdiffra drug was approved by the FDA 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.