Stocks Finish Lower But Up On the Week

Rich Asplund - Barchart - Fri Feb 3, 2023

What you need to know…

The S&P 500 Index ($SPX) (SPY) closed down -1%, the Dow Jones Industrials Index ($DOWI) (DIA) down -0.38%, and the Nasdaq 100 Index ($IUXX) (QQQ) down-1.59%.

Weakness in technology stocks weighed on the overall market after Apple, Alphabet, and Amazon.com reported disappointing quarterly earnings results. However, Apple erased early losses, moved higher, and closed up 2.44%.

Today’s stronger-than-expected U.S economic reports on Jan payrolls and Jan ISM services could raise concern the Fed will need to keep raising interest rates.

U.S. Jan nonfarm payrolls surged +517,000, much stronger than expectations of +188,000 and the largest increase in 6 months. The Jan unemployment rate unexpectedly fell -0.1 to a 53-year low of 3.4%, showing a stronger labor market than expectations for an increase to 3.6%.

U.S. Jan average hourly earnings eased to +4.4% y/y from 4.8% y/y in Dec, the slowest pace of increase in 17 months but stronger than expectations of +4.3% y/y.

The U.S. Jan ISM services index rose +6.0 to 55.2, stronger than expectations of 50.5.

A surge in global bond yields today is also undercutting stocks, as the 10-year T-note yield is up +14.1 bp to 3.534%, and the 10-year German bund yield is up +12.5 bp to 2.205%.

Overseas markets are higher. The Euro Stoxx 50 index is up +0.05%. China’s Shanghai Composite stock index closed up +0.02%, and Japan’s Nikkei Stock index closed up +0.20%.

Today’s stock movers…

Ford Motor (F) is down more than -8% to lead losers in the S&P 500 after reporting Q4 adjusted Ebitda of $2.60 billion, weaker than the consensus of $3.45 billion.

Amazon.com (AMZN) is down more than -4% after reporting Q4 Amazon Web Services net sales excluding F/X up +20%, weaker than the consensus of up +23.5% and forecasting Q1 net sales of $121.0 billion-$126.0 billion, the midpoint below the consensus of $125.5 billion.

Atlassian Corp (TEAM) is down more than -8% to lead losers in the Nasdaq 100 after reporting Q2 new customers rose +4,004, weaker than the consensus of +6,102, and Q2 total of customers of 253,177 was below the consensus of 255,449.

Camden Property Trust (CPT) is down more than -4% after reporting Q4 FFO/share of $1.74, below the consensus of $1.75, and forecasting Q1 FFO/share of $1.63-$1.67, weaker than the consensus of $1.75.

Starbucks (SBUX) is down more than -3% after reporting Q1 comparable same-store sales rose +5%, weaker than the consensus of +6.79%.

Alphabet (GOOGL) is down more than -1% after reporting Q4 advertising revenue of $59.04 billion, below the consensus of $60.64 billion.

Clorox (CLX) is up more than +6% to lead gainers in the S&P 500 after reporting Q2 net sales of $1.72 billion, stronger than the consensus $1.66 billion, and forecasting full-year organic sales of 0% to +3%, the midpoint above the consensus of +0.94%.

Tesla (TSLA) is up more than +5% to lead gainers in the Nasdaq 100 after reporting the shipment of China-made vehicles rose +18% m/m to 66,051.

Apple (AAPL) is up more than +3% to lead gainers in the Dow Jones Industrials after reporting Q1 service revenue of $20.77 billion, better than the consensus of $20.47 billion

Gilead Sciences (GILD) climbed more than +3% in pre-market trading after reporting Q4 adjusted EPS of $1.67, stronger than the consensus of $1.51 and forecasting full-year adjusted EPS of $6.60-$7.00, above the consensus of $6.63.

Nordstrom (JWN) is up more than +22% on news that activist investor Ryan Cohen is building a large stake in the company.

U.S. Steel (X) gained more than -1% in pre-market trading after reporting Q4 net sales of $4.34 billion, stronger than the consensus of $4.02 billion.

Across the markets…

March 10-year T-notes (ZNH23) today are down -1-4/32 points, and the 10-year T-note yield is up +14.1 bp at 3.534%. Mar T-notes this morning are selling off on the stronger-than-expected U.S. Jan payrolls and Jan ISM services reports. Also, hawkish ECB comments and stronger-than-expected Eurozone producer prices have pushed up European government bond yields that are undercutting T-note prices. The 10-year German bund yield is up +12.5 bp to 2.205%.

The dollar index (DXY00) today is up by +0.69%. The dollar today rallied to a 2-week high after stronger-than-expected U.S. economic reports on Jan payrolls and Jan ISM services pushed up T-note yields and strengthened the dollar’s interest rate differentials. The more robust reports also increase the chance that the Fed will keep raising interest rates, which is bullish for the dollar.

EUR/USD (^EURUSD) today is down by -0.42%. Strength in the dollar today has sparked long liquidation in the euro. Losses in EUR/USD were limited after Eurozone Dec producer prices rose more than expected, which is hawkish for ECB policy. Also, hawkish ECB comments today supported the euro after ECB Governing Council members Simkus and Kazimir said the planned 50 bp March rate hike by the ECB probably won't be the last.

Eurozone Dec PPI rose +1.1% m/m and +24.6% y/y, stronger than expectations of -0.4% m/m and +22.4% y/y.

The Eurozone Jan S&P Global composite PMI was revised up by +0.1 to 50.3 from the initially reported 50.2, the strongest pace of expansion in 7 months.

ECB Governing Council member Simkus said, "we're only now entering the mildly restrictive area of monetary policy," and next month's planned 50 bp rate hike by the ECB may not be the last.

ECB Governing Council member Kazimir said, "the fight against inflation is far from won," and the planned March rate hike by the ECB probably won't be the last.

USD/JPY (^USDJPY) today is up by +1.21%. The yen today is under pressure after a stronger-than-expected U.S Jan payroll report pushed T-note yields sharply higher. Also, comments today from BOJ Governor Kuroda weighed on the yen when he said uncertainties over Japan’s economy are extremely high, so it’s appropriate “to continue with monetary easing” to firmly support the economy.

April gold (GCJ3) this morning is down -33.7 (-1.75%), and March silver (SIH23) is down -0.775 (-3.28%). Precious metals prices this morning are sharply lower, with gold falling to a 3-week low and silver dropping to a 1-3/4 month low. Today’s much stronger-than-expected U.S. economic reports on Jan payrolls and Jan ISM services pushed the dollar and T-note yields sharply higher and sparked long liquidation in precious metals. The strength in the U.S. labor market also increases the chances the Fed will keep raising interest rates, which is bearish for metals. In addition, precious metals are under pressure from hawkish ECB comments today that signal the ECB will keep raising interest rates.

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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.