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Broader Market Ends Higher as T-note Yields Decline

Barchart - Tue Feb 6, 3:36PM CST

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Tuesday closed up +0.23%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.37%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.23%.

Stocks on Tuesday settled mixed.  The broader market Tuesday posted moderate gains on a decline in T-note yields. Gains were limited due to mixed corporate earnings and hawkish Fed comments.

On the positive side for stocks, GE Healthcare Technologies closed up more than +11% after reporting better-than-expected Q4 adjusted EPS and forecasting 2024 adjusted EPS above consensus.  Also, Dupont de Nemours closed up more than +6% after reporting Q4 adjusted EPS above consensus and announcing a new $1 billion share buyback program. 

U.S. stocks also have carryover support from a sharp +3% rally today in China’s Shanghai Composite on signs that China will step up efforts to stem the rout in its equity market, including a pledge by a state fund to boost stock purchases.

On the bearish side, FMC Corp closed down more than -9% after reporting weaker-than-expected Q4 revenue and cutting its full-year revenue forecast.  Also, Amkor Technology is down more than -4% after forecasting Q1 net sales below consensus.

U.S. stocks also have carryover support from a sharp +3% rally today in China’s Shanghai Composite on signs that China will step up efforts to stem the rout in its equity market, including a pledge by a state fund to boost stock purchases.

Tuesday’s comments from Cleveland Fed President Mester were slightly hawkish and were negative for stocks when she said she's not in a hurry to begin cutting interest rates and that policymakers will probably gain confidence to cut rates "later this year" if the economy evolves as expected.

The markets are discounting the chances for a -25 bp rate cut at 20% at the March 19-20 FOMC meeting and 84% for that -25 bp rate cut at the following meeting April 30-May 1.

U.S. and European government bond yields on Tuesday move lower. The 10-year T-note fell -7.1 bp to 4.087%.  The 10-year German bund yield climbed to a 1-1/2 week high of 2.344% but fell back and finished down -2.4 bp at 2.292%.  The 10-year UK gilt yield fell -5.7 bp to 3.950%.   

Eurozone Dec retail sales fell -1.1% m/m, weaker than expectations of -1.0% m/m and the biggest decline in a year.

The ECB Dec 1-year inflation expectations eased to +3.2% from +3.5% in Nov, the slowest pace of increase in 1-3/4 years.  The Dec 3-year inflation expectations increased to +2.5 % from +2.4% in Nov.

German Dec factory orders unexpectedly rose +8.9% m/m, stronger than expectations of -0.2% m/m and the largest increase in 3-1/2 years.

Japan Dec household spending fell -2.5% y/y, weaker than expectations of -2.0% y/y.

Overseas stock markets are mixed.  The Euro Stoxx 50 closed up +0.76%.  China’s Shanghai Composite Index closed up +3.23%.  Japan’s Nikkei Stock Index closed down -0.53%.

Today’s stock movers…

GE Healthcare Technologies (GEHC) closed up more than +11% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q4 adjusted EPS of $1.18, better than the consensus of $1.06, and forecast 2024 adjusted EPS of $4.20-$4.35, stronger than the consensus of $4.22.   

Dupont de Nemours (DD) closed up more than +7% after reporting Q4 adjusted EPS of 87 cents, above the consensus of 85 cents, and announced a new $1 billion share buyback program. 

Wilis Towers Watson Plc (WTW) closed up more than +7% after reporting Q4 adjusted operating margin of 34.2%, stronger than the consensus of 33.2%. 

United Parcel Service (UPS) is up more than +3% after UBS upgraded the stock to buy from neutral with a price target of $175.

Simon Property Group (SPG) closed up more than +4% after reporting Q4 FFO/share of $3.69, stronger than the consensus of $3.34.

Xylem (XYL) closed up more than +4% after reporting Q4 revenue of $2.12 billion, better than the consensus of $2.06 billion, and forecast 2024 revenue of $8.40 billion-$8.50 billion, the midpoint above the consensus of $8.42 billion.

Linde Plc (LIN) closed up more than +3% after reporting Q4 sales of $8.30 billion, stronger than the consensus of $8.07 billion. 

Palantir (PLTR) closed up more than +30% after reporting Q4 revenue of $608.4 million, stronger than the consensus of $603.1 million, which prompted Citigroup to upgrade the stock to neutral from sell.   

FMC Corp (FMC) closed down more than -11% to lead losers in the S&P 500 after reporting Q4 revenue of $1.15 billion, weaker than the consensus of $1.24 billion, and cut its full-year revenue forecast to $4.50 billion-$470 billion from a previous estimate of $4.65 billion-$4.85 billion, below the consensus of $4.68 billion. 

Charter Communications (CHTR) closed down more than -4% to lead losers in the Nasdaq 100 after Citigroup cut its price target in the stock to $340 from $425.   

Amkor Technology (AMKR) closed down more than -5% after forecasting Q1 net sales of $1.30 billion-$1.40 billion, weaker than the consensus of $1.51 billion.

Carrier Global (CARR) closed down more than -3% after reporting Q4 sales of $51.0 billion, weaker than the consensus of $5.24 billion. 

Fiserv (FI) closed down more than -2% after reporting Q4 payments revenue of $1.72 billion, weaker than the consensus of $1.75 billion. 

Catalent (CTLT) closed down more than -2% after UBS downgraded the stock to neutral from buy. 

ON Semiconductor (ON) closed down more than -1% after Fubon Securities downgraded the stock to neutral from buy. 

Gartner (IT) closed down more than -1% after forecasting 2024 revenue of at least $6.24 billion, below the consensus of $6.35 billion. 

Across the markets…

March 10-year T-notes (ZNH24) on Tuesday closed up +16 ticks, and the 10-year T-note yield fell by -7.1 bp to 4.087%.  Mar T-notes Tuesday posted moderate gains on some short-covering following the rout seen over the past two sessions.  T-notes raced up to their highs Tuesday afternoon on strong demand for the Treasury’s $54 billion 3-year T-note auction that was awarded at 4.169%, below the 4.177% when-issued yield at the 1 pm EST bidding deadline and a sign of solid demand.  T-notes fell back from their best levels on hawkish comments from Cleveland Fed President Mester, who said she's not in a hurry to begin cutting 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.

Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.

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