What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.42%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.11%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.51%.

Stock indexes this morning are moderately higher, with the Nasdaq 100 climbing to a 3-1/2 week high.  Optimism that Thursday’s U.S. Dec CPI report will show a further softening in price pressures is knocking bond yields lower and is giving stocks a boost. 

An easing of inflation would bolster the case for less-aggressive Fed rate hikes.  The market consensus is for Thursday’s U.S. Dec CPI to ease to 6.5% y/y from 7.1% y/y in Nov and for Dec CPI ex-food and energy to ease to 5.7% y/y from 6.0% y/y in Nov.  Those reports would be down from the 40-year highs of +9.1% y/y (headline) and +6.6% y/y (core) seen in mid-2022.

Lower global bond yields this morning are bullish for stocks. The 10-year UK gilt yield dropped to a 3-week low of 3.366%.  Also, the 10-year German bund yield is down -8.1 bp at 2.227%, and the 10-year T-note yield is down -4.1 bp at 3.578%. 

Airline stocks recovered from early losses and are little changed as they resumed flights after a system outage in the pilot notification system forced the FAA to temporarily halt flights nationwide.

Overseas markets today are mixed.  The Euro Stoxx 50 index is up +1.10%.  The Shanghai Composite Stock index closed down by -0.24%, and Japan’s Nikkei Stock index closed up +1.03%.

Today’s stock movers…

Lower T-note yields today are boosting technology stocks and the overall market.  Amazon.com (AMZN) is up more than +3%.  Also, Alphabet (GOOGL), Crowdstrike Holdings (CRWD), and Datadog (DDOG) are up more than +2%.  In addition, Microsoft (MSFT), Marvell Technology (MRVL), and Globalfoundries (GFS) are up more than +1%.

Laboratory stocks today are climbing for a second day on earnings optimism for the sector after Danaher Tuesday announced that preliminary Q4 adjusted core revenue growth was in the high-single-digit percent range, stronger than previous guidance of flat to low-single-digit percent decline.  As a result, Bio-Rad Laboratories (BIO) is up more than +6% to lead gainers in the S&P 500. Also, Charles River Laboratories (CRL) is up more than +5%.  In addition, Thermo Fisher Scientific (TMO), Danaher (DHR), and Laboratory Corp of America Holdings (LH) are up more than +2%. 

Atlassian Corp (TEAM) is up more than +6% to lead gainers in the Nasdaq 100 after Mizuho Securities said the company “significantly” raised prices for some products.

Expedia Group (EXPE) is up more than +3% after Oppenheimer upgraded the stock to outperform from perform.

Autodesk (ADSK) is up more than +1% after Berenberg initiated coverage on the stock with a buy rating and a price target of $230.

Illumina (ILMN) is up more than +1% after HSBC initiated coverage on the stock with a buy rating and a price target of $300.

Medical technology product providers are under pressure today after Intuitive Surgical reported preliminary Q4 revenue of $1,66 billion, below the consensus of $1.69 billion.  As a result, Teleflex (TFX) is down more than -5% to lead losers in the S&P 500.  Also, Intuitive Surgical (ISRG) is down more than -4% to lead losers in the Nasdaq 100.  In addition, Dexcom (DXM)  and Stryker (SYK) are down more than -2%.

Levi Strauss (LEVI) is down more than -3% after Citigroup downgraded the stock to neutral from buy.

Verizon Communications (VZ) is down more than -1% to lead losers in the Dow Jones Industrials after Bloomberg data showed the Eaton Vance Tax-Managed Value Fund exited its position in Verizon.

Salesforce (CRM) is down more than -1% after Bernstein downgraded the stock to underperform from market perform.

Across the markets…

March 10-year T-notes (ZNH23) today are up +8 ticks, and the 10-year T-note yield is down -4.1 bp at 3.578%.  Strength in European government bonds today is underpinning T-notes prices.  The 10-year UK gilt yield fell to a 3-week low today of 3.388%, and the 10-year German bund yield is down -7.7 bp at 2.231%.  Further gains in T-notes may be limited by supply pressures as the Treasury will auction $32 billion of 10-year T-notes this afternoon as part of this week’s $90 billion auction package of T-notes and T-bonds. 

The dollar index (DXY00) today is up by +0.02%.  The dollar today is slightly higher.  Weakness in the yen today is supporting modest gains in the dollar as the yen weakened after the BOJ boosted QE.  Strength in EUR/USD is limiting gains in the dollar after hawkish ECB comments boosted the euro to a 7-month high.

EUR/USD (^EURUSD) today is up by +0.30% and posted a 7-month high. Hawkish comments today from ECB Governing Council member Holzmann boosted the euro when he said only a slowdown in core inflation could alter the ECB's resolve to raise interest rates.  Today’s better-than-expected Italian retail sales report was supportive for the euro. 

ECB Governing Council member Holzmann said while there's hope that headline consumer-price gains have peaked, that's not the case for underlying inflation.  Only a slowdown in core inflation can alter the ECB's resolve to raise interest rates.

Italy’s Nov retail sales unexpectedly rose +0.8% m/m, stronger than expectations of -0.3% m/m.

USD/JPY (^USDJPY) today is up by +0.22%.  The yen today is moderately lower after the BOJ boosted QE when it announced unscheduled debt purchases.  The BOJ offered to buy 500 billion yen of 1-to-10-year notes and 250 billion of debt due in more than 10 years.  It also offered to buy unlimited quantities of 1-to-5-year securities at fixed yields.  The BOJ has conducted a combination of additional unlimited and fixed-amount purchase operations every business day since Dec 28, except for Jan 5 and Jan 10.

Today’s Japanese economic news was bearish for the yen after the Nov leading index CI fell -1.0 to a 23-month low of 97.6, right on expectations.

February gold (GCG3) this morning is up +1.6 (+0.09%), and March silver (SIH23) is up +0.125 (+0.53%).  Precious metals prices this morning are slightly higher, with gold climbing to an 8-month high. Lower global bond yields today are bullish for metals.  Silver also has carry-over support today from a rally in copper prices to a 7-month high on hopes that the reopening of China’s economy will boost industrial metals demand.  Gains in gold were limited ahead of Thursday’s U.S. Dec CPI report. 

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