Stocks Waver on Mixed Corporate Earnings Results

Rich Asplund - Barchart - Tue Jan 23, 10:08AM CST

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.04%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.36%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.13%.

Stock indexes this morning are little changed as they consolidate just below Monday’s record highs. Stocks are wavering today on mixed corporate earnings results. Airline stocks are moving higher after United Airlines Holdings reported stronger-than-expected Q4 adjusted EPS. Also, RTX Corp is up more than +7% after reporting Q4 adjusted EPS above consensus, and Verizon Communications is up more than +5% after forecasting 2024 adjusted EPS above consensus.

On the negative side, 3M Co is down more than -10% after forecasting 2024 adjusted EPS below consensus. Also, homebuilders are under pressure after DR Horton reported weaker-than-expected Q1 EPS. In addition, higher T-note yields today are negative for stocks.

The U.S. Jan Richmond Fed manufacturing survey current conditions unexpectedly fell -4 to a 3-1/2 year low of -15, weaker than expectations of an increase to -8.

The markets are discounting the chances for a -25 bp rate cut at 3% at the next FOMC meeting on Jan 30-31 and 42% for that same -25 bp rate cut for the following meeting on March 19-20.

U.S. and European government bond yields today are higher. The 10-year T-note yield is up +4.4 bp at 4.149%. The 10-year German bund yield is up +5.2 bp at 2.342%. The 10-year UK gilt yield is up +7.8 bp at 3.982%.

Overseas stock markets are mixed. The Euro Stoxx 50 is down -1.03%. China’s Shanghai Composite Index closed up +0.53%. Japan’s Nikkei Stock Index closed down -0.08%.

Today’s stock movers…

RTX Corp (RTX) is up more than +7% to lead gainers in the S&P 500 after reporting Q4 adjusted EPS of $1.29, better than the consensus of $1.24.

Airline stocks are climbing today, led by a +6% jump in United Airlines Holdings (UAL) after it reported Q4 adjusted EPS of $2.00, stronger than the consensus of $1.69. Also, American Air Lines Group (AAL), Delta Air Lines (DAL), and Southwest Airlines (LUV) are up more than +2%.

Verizon Communications (VZ) is up more than +5% to lead gainers in the Dow Jones Industrials after forecasting 2024 adjusted EPS of $4.50-$4.70, the midpoint above the consensus of $4.58.

Globalfoundries (GFS) is up more than +3% to lead gainers in the Nasdaq 100 after Cantor Fitzgerald initiated coverage on the stock with a recommendation of overweight and a price target of $70.

Procter & Gamble (PG) is up more than +4% after reporting Q2 core EPS of $1.84, better than the consensus of $1.70.

Brown & Brown (BRO) is up more than +4% after reporting Q4 revenue of $1.03 billion, above the consensus of $987.6 million.

Haliburton (HAL) is up more than +3% after reporting Q4 adjusted EPS of 86 cents, above the consensus of 80 cents, and boosted its quarterly dividend to 17 cents per share from 16 cents per share.

Paccar (PCAR) is up more than +2% after reporting Q4 adjusted EPS of $2.69, well above the consensus of $2.23.

Western Digital (WDC) is up more than +2% after Cantor Fitzgerald initiated coverage of the stock with a recommendation of overweight and a price target of $70.

3M Co (MMM) is down more than -10% to lead losers in the S&P 500 and Dow Jones Industrials after forecasting 2024 adjusted EPS of $9.35-$9.75, below the consensus of $9.81.

Homebuilders are under pressure today, led by an -8% fall in DR Horton (DHI) after it reported Q1 EPS of $2.82, weaker than the consensus of $2.89. Also, PulteGroup (PHM), Toll Brothers (TOL), Lennar (LEN), and Builders FirstSource (BLDR) are down more than -4%.

Invesco (IVZ) is down more than -5% after reporting Q4 net flows unexpectedly fell -$8.3 billion, weaker than expectations of an increase of +$8.78 billion.

Johnson & Johnson (JNJ) is down more than -2% despite reporting better-than-expected Q4 sales and earnings after CFO Wolk said pharma sales will be lower in the second half of the year on declining sales of the psoriasis drug Stelara.

Coinbase Global (COIN) is down more than -4% after JPMorgan Chase downgraded the stock to underweight from neutral with a price target of $80.

Alkami Technology (ALKT) is down more than -1% after Goldman Sachs downgraded the stock to neutral from buy.

Across the markets…

March 10-year T-notes (ZNH24) this morning are down -10 ticks, and the 10-year T-note yield is up +4.4 bp at 4.149%. Mar T-note prices this morning are under pressure from strength in stocks and supply pressures. This afternoon, the Treasury will auction $60 billion of 2-year T-notes as part of this week’s $190 billion auction package of T-notes and floating-rate notes.

The dollar index (DXY00) today is up +0.35%. The dollar recovered from overnight losses and moved higher on strength in T-note yields. Also, a repricing of chances for Fed rate cuts is boosting the dollar as swap markets now discount the chances of a Fed rate cut at the March FOMC meeting at 42%, below the more than 60% chance the market priced in earlier this month. Lower T-note yields today are bearish for the dollar.

EUR/USD (^EURUSD) is down by -0.46%. A rebound in the dollar today is weighing on the euro. Losses in the euro accelerated after the Eurozone Jan consumer confidence index unexpectedly declined.

The Eurozone Jan consumer confidence index unexpectedly fell -1.0 to -16.1, weaker than expectations of an increase to -14.3.

Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 2% for its next meeting on January 25 and 18% for the following meeting on March 7.

USD/JPY (^USDJPY) is up by +0.24%. The yen whipsawed lower and higher today on BOJ actions and comments from BOJ Governor Ueda. The yen initially fell today after the BOJ kept its short-term rate at -0.1% and retained its current yield-curve control parameters. However, the yen recovered and moved higher after the BOJ raised its 2024 GDP forecast and cut its 2024 CPI forecast and after BOJ Governor Ueda said the BOJ would raise rates if its price goal is in sight. However, the yen gave up its advance and turned lower after T-note yields rose.

As expected, the BOJ voted 9-0 to maintain its policy rate at -0.1% and keep the 10-year JGB yield target at about 0%.

The BOJ raised its 2024 GDP forecast to +1.2% from +1.0% previously and cut its 2024 core CPI estimate to 2.4% from 3.8%.

BOJ Governor Ueda said certainty in the BOJ's outlook is rising gradually and policy will remain accommodative even if the BOJ ends negative rates.

Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 23% for its next meeting on March 19 and at 50% for the following meeting on April 26.

February gold (GCG24) today is up +3.5 (+0.17%), and Mar silver (SIH24) is up +0.244 (+1.09%). Gold and silver prices this morning are moderately higher. Gold gained today on increased demand as a store of value after the BOJ kept its negative interest rate policy. Silver found support today after the BOJ raised its 2024 Japan GDP forecast, a positive factor for industrial metals demand.

Limiting gains in precious metals today are a stronger dollar and higher global bond yields. Gold prices are also undercut by the ongoing long liquidation of gold by funds after long gold holdings in ETFs fell to a 4-year low Monday.

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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.