Stocks Give Up Earlier Gains And Drift Lower

Rich Asplund - Barchart - Thu Feb 9, 2023

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.33%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.32%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.26%.

U.S. stock indices are moderately lower this afternoon. trials climbing to a 1-week high, after initially seeing gains when this morning’s U.S. weekly jobless claims report showed that unemployment claims rose more than expected, which was a dovish factor for Fed policy.

The Euro Stoxx 50 index hit a 1-year high today. An easing of German price pressures knocked bond yields lower and gave European stocks a lift after German Jan CPI eased to +9.2% y/y from +9.6% y/y in Dec, a 5-month low.

Disney is up more than +1.8% after reporting better-than-expected Q1 revenue and announcing a restructuring that includes 7,000 job cuts and $5.5 billion in cost savings. Also, MGM Resorts International, Wynn Resorts, O’Reilly Automotive, BorgWarner, and AstraZeneca are all up after reporting stronger-than-expected Q4 earnings results.

On the negative side, International Flavors & Fragrances is down more than -15% after reporting weak Q4 net sales. Also, Baxter International is down more than -11% after reporting Q4 adjusted EPS below consensus. Also, Sealed Air Corp and Equifax are down 3% or more after forecasting weaker-than-expected 2023 adjusted EPS

The 10-year T-note yield is up +0.019 at 3.654% and the 10-year German bund yield down -5.1 bp at 2.312%.

U.S. weekly initial unemployment claims rose +13,000 to 196,000, showing a weaker labor market than expectations of 190,000. Likewise, weekly continuing claims rose +38,000 to 1.688 million, showing a weaker labor market than expectations of 1.660 million.

Overseas markets are mixed. The Euro Stoxx 50 index is up +0.97%. China’s Shanghai Composite stock index closed up +1.18%, and Japan’s Nikkei Stock index closed down -0.08%.

Today’s stock movers…

Monolithic Power Systems (MPWR) is up more than +12% to lead gainers in the S&P 500 after reporting Q4 adjusted EPS of $3.17, stronger than the consensus of $3.14.

MGM Resorts International (MGM) is up more than +8% after reporting Q4 net revenue of $3.59 billion, stronger than the consensus of $3.34 billion, and authorizing an additional $2 billion for share buybacks.

Wynn Resorts (WYNN) is up more than +7% after reporting Q4 operating revenue of $1.0 billion, well above the consensus of $953.7 million.

BorgWarner (BWA) is up more than +7% after reporting Q4 net sales of $4.11 billion, above the consensus of $3.89 billion.

Tesla (TSLA) is up more than +5% on signs that recent price cuts are spurring demand for the company’s electric vehicles after it delivered 66,051 China-made cars in January, up +18.4% m/m.

Everest Re Group Ltd (RE) is up more than +5% after reporting Q4 operating EPS of $12.21, well above the consensus of $9.38.

Walt Disney (DIS) is up more than +3% to lead gainers in the Dow Jones Industrials after reporting Q1 revenue of $23.51 billion, above the consensus of $23.39 billion, and announcing a restructuring that includes 7,000 job cuts and $5.5 billion in cost savings.

AstraZeneca Plc (AZN) is up more than +6% to lead gainers in the Nasdaq 100 after reporting Q4 core EPS of $1.38, better than the consensus of $1.35.

O’Reilly Automotive (ORLY) is up more than +3% after reporting Q4 sales of $3.64 billion, better than the consensus of $3.50 billion, and forecasting full-year comparable sales will climb +4% to +6%, stronger than the consensus of +3.75%.

International Flavors & Fragrances (IFF) is down more than -15% to lead losers in the S&P 500 after reporting Q4 net sales of $2.84 billion, below the consensus of $2.89 billion and forecasting 2023 sales of about $12.50 billion, weaker than the consensus of $12.69 billion.

Baxter International (BAX) is down more than -11% after reporting Q4 adjusted EPS of 88 cents, weaker than the consensus of 94 cents, and forecast 2023 adjusted EPS of $2.75-$2.95, well below the consensus of $3.55.

Steris Plc (STE) is down more than -7% after reporting Q3 adjusted EPS of $2.02, below the consensus of $2.19, and cut its full-year adjusted EPS estimate to $8.00 to $8.10 from a prior estimate of $8.40 to $8.60.

Sealed Air Corp (SEE) is down more than -5% after forecasting 2023 adjusted EPS of $3.50-$3.80, weaker than the consensus of $4.10.

Alphabet (GOOGL) is down more than -3%, adding to Wednesday’s -7% plunge after reports that the company’s newly launched artificial intelligence chatbot Bard delivered erroneous responses.

Equifax (EFX) is down more than -3% after forecasting full-year adjusted EPS of $7.05-$7.35, weaker than the consensus of $7.65.

Across the markets…

March 10-year T-notes (ZNH23) today are up +3 ticks, and the 10-year T-note yield is down -0.7 bp at 3.603%. A rally in 10-year German bunds today provides carry-over support to T-note prices after German Jan CPI rose less than expected. T-note maintained their gains after this morning’s U.S. weekly jobless claims report showed that claims rose more than expected, a dovish factor for Fed policy. Bearish factors today include a rally in stocks and supply pressures as the Treasury later today will auction $21 billion 30-year T-bonds as part of this week’s auction package of $96 billion of T-note and T-bonds.

The dollar index (DXY00) today is down by -0.67% as a decline in T-note yields is weighing on the dollar. Also, signs of a weaker U.S. labor market are undercutting the dollar after U.S. weekly initial unemployment claims rose more than expected. In addition, today’s rally in stocks is reducing liquidity demand for the dollar.

EUR/USD (^EURUSD) today is up by +0.68%. Dollar weakness today is boosting the euro. Also, a rally in the Euro Stoxx 50 today to a 1-year high shows confidence in the Eurozone economic outlook and is bullish for EUR/USD. A weaker-than-expected German Jan CPI report today is dovish for ECB policy and negative for the euro.

German Jan CPI (EU harmonized) unexpectedly eased to +9.2% y/y from +9.6% y/y in Dec, weaker than expectations of +10.0% y/y and the slowest pace of increase in 5 months.

USD/JPY (^USDJPY) today is down by -0.61%. The yen today is climbing against the dollar as lower T-notes yields boost the yen. The yen also found support from a Bloomberg report today that said Japanese Prime Minister Kishida might face a divided party if the new BOJ Governor is someone that’s unlikely to maintain the BOJ’s current ultra-easy policy.

Today’s Japanese economic news was bearish for the yen. Japan Jan machine tool orders fell -9.7% y/y, the biggest decline in 2-1/4 years.

April gold (GCJ3) this morning is up +4.1 (+0.22%), and March silver (SIH23) is up +0.030 (+0.13%). Precious metals prices this morning are moderately higher. A weaker dollar today is bullish for metals prices. Also, today’s decline in global bond yields is supportive of metals. A rally in stocks today is bearish as it curbs safe-haven demand for precious metals. Also, gold prices are under pressure from the liquidation of long gold positions in ETFs after the amount of gold held in ETFs fell to a new 2-3/4 year low Wednesday.

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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.