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Stocks Little Changed after Mixed Economic News and Strong Corporate Earnings

Barchart - Tue Feb 27, 10:27AM CST

The S&P 500 Index ($SPX) (SPY) this morning is up +0.02%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.33%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.17%.

Stock indexes this morning are mixed.  Strong earnings results from Norwegian Cruise Line Holdings, Constellation Energy, and AutoZone are supporting the broader market.  Today’s U.S. economic news was mixed.

Strong earnings are underpinning stocks as data from Bloomberg Intelligence showed Q4 earnings for reporting S&P 500 companies have grown +7.7% y/y, well above the pre-earnings season estimate of +1.2% and the highest beat rate since Q4 2021.  About 90% of the S&P 500 companies have reported thus far.

The draft communique from the G-20 meeting supported stocks as it said, "Risks to the global economic outlook are more balanced, and the likelihood of a soft landing in the global economy has increased."

Kansas City Fed President Schmid said Monday night, "With inflation running above target, labor markets tight, and demand showing considerable momentum, my own view is that there is no need to preemptively adjust the stance of monetary policy."

U.S. Jan capital goods new orders nondefense ex-aircraft and parts, a proxy for capital spending, rose +0.1% m/m, right on expectations.  However, Dec was revised downward to -0.6% m/m from the initially reported +0.2% m/m.

The U.S. Dec S&P CoreLogic composite-20 home price index rose +6.13% y/y, stronger than expectations of +6.05% y/y and the largest increase in 13 months.

The Conference Board U.S. Feb consumer confidence index unexpectedly fell -4.2 to 106.7, weaker than expectations of an increase to 115.0.

The U.S. Feb Richmond Fed manufacturing survey rose +10 to -5, stronger than expectations of -9.

The markets are discounting the chances for a -25 bp rate cut at 3% for the March 19-20 FOMC meeting and 21% for the following meeting on April 30-May 1.

Overseas stock markets are higher.  The Euro Stoxx 50 is up +0.47%.  China’s Shanghai Composite closed up +1.29%.  Japan’s Nikkei Stock Index closed up +0.01%.

Interest Rates

March 10-year T-notes (ZNH24) this morning are up +1 tick, and the 10-year T-note yield is up +0.4 bp at 4.284%.  March T-notes this morning are slightly higher. T-notes recovered from early losses this morning after the Conference Board’s U.S. Feb consumer confidence index unexpectedly declined.  T-notes also have support on anticipation of month-end rebalancing of bond indexes later this week, which may spur the buying of longer-dated Treasuries by bond fund managers who need to balance the duration of their portfolios. 

T-notes this morning initially moved lower on negative carryover from a decline in 10-year UK gilts to a 2-1/2 month low.  Also, hawkish comments Monday night from Kansas City Fed President Schmid weighed on T-notes when he said the Fed is in no hurry to cut interest rates.  In addition, supply pressures are bearish for T-notes as the Treasury will auction $42 billion of 7-year T-notes later today to conclude this week’s auction schedule of $169 billion of T-notes. 

European government bond yields today are higher.  The 10-year German bund yield is up +1.4 bp at 2.454%.  The 10-year UK gilt yield rose to a 2-1/2 month high of 4.190% and is up +2.7 bp at 4.189%.

Eurozone Jan M3 money supply rose +0.1% y/y, weaker than expectations of +0.3% y/y.

The German Mar GfK consumer confidence index rose +0.6 to -29.0, right on expectations.

U.S. Stock Movers

Cruise line stocks are rallying today after Norwegian Cruise Line Holdings reported Q4 revenue of $1.99 billion, above the consensus of $1.97 billion, and forecast 2024 adjusted Ebitda of about $2.20 billion, stronger than the consensus of $2.18 billion. As a result, Norwegian Cruise Line Holdings (NCLH) is up more than +14% to lead gainers in the S&P 500.  Also, Carnival (CCL) is up more than +5%, and Royal Caribbean Cruises (RCL) is up more than +3%

Constellation Energy (CEG) is up more than +11% to lead gainers in the Nasdaq 100 after reporting Q4 adjusted Ebitda of $1.14, stronger than the consensus of $1.04.

Albemarle (ALB) is up more than +6% after Mizuho Securities raised its price target on the stock to $115 from $105.

AutoZone (AZO) is up more than +5% after reporting Q2 operating profit of $743.2 million, better than the consensus of $700.4 million. 

Lowe’s (LOW) is up more than +2% after reporting Q4 EPS of $1.77, stronger than the consensus of $1.68.

American Electric Power (AEP) is up more than +2% after forecasting 2024 operating EPS of $5.53-$5.73, the midpoint stronger than the consensus of $5.60.

Seagate Technology Holdings (STX) is up more than +2% after Evercore ISI initiated coverage on the stock with an outperform rating and a price target of $110.

Zoom Video Communications (ZM) is up more than +4% after reporting Q4 adjusted EPS of $1.42, stronger than the consensus of $1.15, and forecast 2025 adjusted EPS of $4.85-$4.88, above the consensus of $4.72. 

SBA Communications (SBAC) is down more than -4% to lead losers in the S&P 500 after reporting Q4 revenue of $675 million, weaker than the consensus of $683 million, and forecast 2024 revenue of $2.67 billion-$2.71 billion, below the consensus of $2.75 billion.

Henry Schein (HSIC) is down more than -3% after forecasting 2024 adjusted EPS of $5.00-$5.16, the midpoint below the consensus of $5.12.

American Tower (AMT) is down more than -2% after forecasting 2024 adjusted Ebitda of $7.08 billion-$7.19 billion, with the midpoint being below the consensus of $7.14 billion. 

Chevron (CVX) is down more than -2% to lead losers in the Dow Jones Industrials after Exxon Mobil said it was considering a move to block the $53 billion merger between Chevron and Hess Corp.  Hess (HES) is down -3% on the news as well.

Unity Software (U) is down more than -8% after forecasting that 2024 revenue from its core businesses will be $1.76 billion-$1.80 billion, below the $2.2 billion from 2023. 

Aaron’s Co (AAN) is down more than -15% after reporting Q4 revenue of $529.5 million, weaker than the consensus of $545.1 million, and forecast full-year revenue total of $2.06 billion-$2.13 billion, well below the consensus of $2.23 billion. 

JM Smucker (SJM) is down more than -2% after cutting its full-year free cash flow estimate to $500 million from a previous estimate of $530 million, below the consensus of $639 million.

Workday (WDAY) is down more than -1% after reporting Q4 subscription revenue of $1.76 billion, below the consensus of $1.77 billion, and forecast 2025 subscription revenue of $7.73 billion-$7.78 billion, the midpoint weaker than the consensus of $7.77 billion. 

Earnings Reports (2/27/2024)

Agilent Technologies Inc (A), American Electric Power Co Inc (AEP), American Tower Corp (AMT), AutoZone Inc (AZO), Axon Enterprise Inc (AXON), Constellation Energy Corp (CEG), Devon Energy Corp (DVN), eBay Inc (EBAY), Extra Space Storage Inc (EXR), First Solar Inc (FSLR), Henry Schein Inc (HSIC), J M Smucker Co/The (SJM), Lowe's Cos Inc (LOW), Norwegian Cruise Line Holdings (NCLH), Pinnacle West Capital Corp (PNW), Republic Services Inc (RSG), Sempra (SRE), Universal Health Services Inc (UHS).



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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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