Stocks Mixed as Markets Brace for Fed Chair Powell’s Comments

Rich Asplund - Barchart - Tue Feb 7, 2023

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.22%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.35%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.07%.

U.S. stock index futures this morning are mixed. U.S. stock index futures this morning are on edge ahead of a speech later today from Fed Chair Powell at the Economic Club of Washington. The markets will be watching to see if Mr. Powell issues fresh hawkish statements following last Friday’s strong payroll report for January, such as saying that the peak in interest rates may be higher than policymakers had previously expected.

Negative corporate news today is weighing on stocks. Chegg is down more than -20%, and ZoomInfo Technologies is down more than -6% after forecasting disappointing full-year revenue. Also, Pinterest is down more than -6% after reporting weaker-than-expected Q4 revenue, and Incyte is down more than -4% after forecasting full-year Jakafi net product revenue.

On the positive side for stocks, Activision Blizzard is up more than +5% after reporting stronger-than-expected Q4 net bookings. Also, Oak Street Health is up more than +30% after the Wall Street Journal report that the company is close to an agreement to be acquired by CVS Health for about $10.5 billion.

Higher global bond yields are bearish for stocks. The 10-year T-note yield climbed t a 1-month high today at 3.664%, and the 10-year German bund yield rose t a 1-month high of 2.336%.

Minneapolis Fed President Kashkari said January's strong labor-market report shows that the Fed needs to keep raising interest rates and "right now he's still around 5.4%," referring to his forecast for how high interest rates need to go to curb inflation. FOMC members, in their December dot-plot, forecasted a median expectation of a peak funds rate of 5.1% at the end of this year.

The U.S. Dec trade deficit of -$67.4 billion was slightly narrower than the consensus of -$68.5 billion, which had a mildly positive implication for Q4 GDP. In 2022, the U.S. trade deficit widened to a record high of -$106.4 billion in March 2022 but then narrowed to a 2-year low of -$61.0 billion in November 2022.

Overseas markets are mixed. The Euro Stoxx 50 index is down -0.12%. China’s Shanghai Composite stock index closed up +0.29%, and Japan’s Nikkei Stock index closed down -0.03%.

Today’s stock movers…

Incyte (INCY) is down more than -4% to lead losers in the S&P 500 after forecasting full-year Jakafi net product revenues of $2.53 billion-$2.63 billion, the midpoint below the consensus of $2.60 billion.

Pinterest (PINS) is down more than -6% after reporting Q4 revenue of $877.2 million, weaker than the consensus of $887.2 million.

Chegg (CHGG) is down more than -20% after forecasting 2023 revenue of $745 million-$760 million, well below the consensus of $820.5 million.

ZoomInfo Technologies (ZI) is down more than -6% after forecasting full-year revenue of $1.275 billion-$1.285 billion, weaker than the consensus of $1.31 billion.

Carrier Global (CARR) is down more than -3% after reporting Q4 EPS of 32 cents, weaker than the consensus of 40 cents, and forecasting free cash flow of about $1.9 billion, below the consensus of $2.13 billion.

Simon Property Group LP (SPG) is down more than -3% after forecasting full-year FFO per share of $11.70-$11.95, below the consensus of $12.12.

Gartner (IT) is down more than -3% after forecasting 2023 adjusted EPS of at least $8.80, well below the consensus of $9.53.

Skyworks Solutions (SWKS) is up more than +8% to lead gainers in the S&P 500 after reporting Q1 adjusted operating income of $491.3 million, above the consensus of $487.9 million.

Fiserv (FISV) is up more than +6% to lead gainers in the Nasdaq 100 after forecasting 2023 adjusted EPS of $7.25 to $7.40, the midpoint above the consensus of $7.29.

DuPont de Nemours (DD) is up more than +5% after reporting Q4 operating Ebitda of $758 million, stronger than the consensus of $746.7 million.

Activision Blizzard (ATVI) is up more than +5% after reporting Q4 net bookings of $3.57 billion, stronger than the consensus of $3.08 billion.

Oak Street Health (OSH) is up more than +30% after the Wall Street Journal report that the company is close to an agreement to be acquired by CVS Health for about $10.5 billion.

Across the markets…

March 10-year T-notes (ZNH23) today are down -4 ticks, and the 10-year T-note yield is up +0.9 bp at 3.649%. Mar T-notes this morning matched Monday’s 1-month low, and the 10-year T-note yield rose to a 1-month high of 3.664%. T-note prices are under pressure today on hawkish comments from Minneapolis Fed President Kashkari, who said last Friday’s strong U.S. jobs report shows the need for more rate hikes. Also, hawkish ECB comments today pushed the 10-year German bund yield to a 1-month high of 2.336% and is weighing on T-notes. In addition, supply pressures are undercutting T-notes as the Treasury later today will auction $40 billion of 3-year T-notes as part of this week’s auction package of $96 billion of T-note and T-bonds.

The dollar index (DXY00) today is up by +0.16% and posted a 4-week high. Hawkish comments today from Minneapolis Fed President Kashkari pushed T-note yields higher and supported the dollar. Also, the weakness in stocks this morning has boosted the liquidity demand for the dollar. Finally, short covering ahead of Fed Chair Powell’s speech later today supports the dollar.

EUR/USD (^EURUSD) today is down by -0.38% and posted a 4-week low. A stronger dollar today is undercutting the euro. Also, today’s weaker-than-expected report on German Dec industrial production weighs on EUR/USD. Hawkish comments today from ECB Governing Council member and Bundesbank President Nagel limited losses in the euro when he said more "significant" rate hikes from the ECB are needed.

German Dec industrial production fell -3.1% m/m, weaker than expectations of -0.8% m/m and the biggest decline in 9 months.

ECB Governing Council member and Bundesbank President Nagel said ECB interest rates aren't yet in restrictive territory, and more "significant" rate hikes are needed.

USD/JPY (^USDJPY) today is down by -0.51%. The yen strengthened after today’s report on Japanese wags showed the largest increase in 26 years, which could prompt the BOJ to exit its ultra-easy monetary policy. Higher T-note yields today are limiting gains in the yen.

Today’s Japanese economic news was mixed for the yen. On the positive side, Dec labor cash earnings rose +4.8% y/y, stronger than expectations of +2.5% y/y and the biggest increase in 26 years. Conversely, Dec household spending fell -1.3% y/y, weaker than expectations of -0.4% y/y and the biggest decline in 8 months.

April gold (GCJ3) this morning is up +4.2 (+0.22%), and March silver (SIH23) is up +0.023 (+0.10%). Precious metals prices this morning are slightly higher, with silver rebounding from a 2-month low. Signs of stronger Chinese demand for gold support prices after the PBOC boosted its gold reserves in January by 15 tons, its third consecutive monthly increase. Also, short covering ahead of today’s speech by Fed Chair Powell is lifting precious metals prices. Gains in metals are limited, with today’s rally in the dollar index to a 4-week high. Also, higher global bond yields today are bearish for metals.

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.