Stocks Mixed on Weakness in Tech as Bond Yields Climb

Rich Asplund - Barchart - Fri Feb 10, 2023

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 up +0.33%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.87%.

U.S. stock indexes this morning are mixed. Weakness in technology stocks is pressuring the overall market as higher bond yields weigh on the sector. The 10-year T-note yield climbed to a 5-week high today at 3.726% as a chorus of Fed speakers this week reinforced the need for the Fed to keep raising interest rates for longer. The broader market recovered from its worst levels this morning after the University of Michigan U.S. Feb consumer sentiment rose more than expected to a 13-month high.

On the positive side for stock indexes, energy stocks are moving higher, with the prices of WTI crude up more than +1% to a 1-1/2 week high after Russia said it plans to cut March oil production by 500,000 bpd in retaliation for international sanctions. OPEC+ said they wouldn’t boost output to make up for the shortfall.

Some disappointing earnings results are weighing on stock index futures this morning. Lyft plunged more than -33% after forecasting Q1 revenue well below expectations. Also, News Corp is down more than -8% after reporting weaker-than-expected Q2 revenue and saying it would cut about 5% of its workforce this year. In addition, Expedia Group is down more than -8% after reporting Q4 gross bookings below consensus.

The University of Michigan U.S. Feb consumer sentiment rose +1.5 to a 13-month high of 66.4, stronger than expectations of 65.0.

The University of Michigan U.S. Feb 1-year inflation expectations rose +0.3 to 4.2%, above expectations of 4.0%. The 5-10 year inflation expectations were unchanged at 2.9%, right on expectations.

Overseas markets are mixed. The Euro Stoxx 50 index is down -1.41%. China’s Shanghai Composite stock index closed down -0.30%, and Japan’s Nikkei Stock index closed up +0.31%.

Today’s stock movers…

News Corp (NWSA) is down more than -8% to lead losers in the S&P 500 after reporting Q2 revenue of $2.52 billion, weaker than the consensus of $2.58 billion and said it would cut about 5% of its workforce this year.

Expedia Group (EXPE) is down more than -8% after reporting Q4 gross bookings of $20.51 billion, weaker than the consensus of $21.06 billion. Booking Holdings (BKNG) also fell more than -3% on the news.

Newell Brands (NWL) is down more than -3% after forecasting full-year net sales of $8.4 billion to $8.6 billion, well below the consensus of $9.06 billion.

Salesforce (CRM) is down more than -4% to lead losers in the Dow Jones Industrials after UBS said that checks with Salesforce’s largest partners showed they missed their Q4 targets, which points to weakness in Salesforce.

A jump in the 10-year T-note yield to a 5-week high is weighing on chip stocks. Nvidia (NVDA) is down more than -4%. Also, Advanced Micro Devices (AMD) and KLA Corp (KLAC) are down more than -2%. In addition, Applied Materials (AMAT), Microchip Technology (MCHP), Lam Research (LRCX), ASML Holding NV (ASML), and NXP Semiconductors NV (NXPI) are down more than -1%.

Lyft (LYFT) is down by more than -33% after forecasting Q1 revenue of $975 million, well below the consensus of $1.09 billion.

A rally in WTI crude oil today to a 1-1/2 week high is lifting energy producers and energy service providers. ConocoPhillips (COP), Schlumberger (SLB), Valero Energy (VLO), and Marathon Oil (MRO) are up more than +3%. Also, Diamondback Energy (FANG), Devon Energy (DVN), Occidental Petroleum (OXY), and Phillips 66 (PSX) are up more than +2%. In addition, Chevron (CVX) is up more than +2% to lead gainers in the Dow Joines Industrials.

Dexcom (DXCM) is up more than +9% to lead gainers in the S&P 500 after reporting Q4 revenue of $815.2 million, better than the consensus of $810.1 million.

Yelp (YELP) is up more than +7% after reporting Q4 adjusted Ebitda of $80.4 million, better than the consensus of $78.2 million.

Motorola Solutions (MSI) is up more than +5% after reporting Q4 net sales of $2.70 billion, above the consensus of $2.53 billion.

Global Payments (GPN) is up more than +5% after forecasting 2023 adjusted revenue of $8.58 billion-$8.68 billion, stronger than the consensus of $8.56 billion.

VF Corp (VFC) is up more than +3% after Stifel upgraded the stock to buy from hold.

Across the markets…

March 10-year T-notes (ZNH23) today are down -7 ticks, and the 10-year T-note yield is up +5.7 bp at 3.717%. Mar 10-year T-notes dropped to a 5-week low, and the 10-year T-note yield rose to a 5-week high of 3.726%. T-notes are under pressure today on negative carry-over from an increase in 10-year German bund yields. The 10-year German bund yield is up +6.7 bp to 2.371%. T-notes maintained moderate losses after the University of Michigan U.S. Feb consumer sentiment, and 1-year inflation expectations rose more than expected.

The dollar index (DXY00) today is up by +0.08%. The dollar today is modestly higher on strength in T-note yields. Also, today’s news that showed the University of Michigan U.S. Feb consumer sentiment climbing to a 13-month high supports the dollar. Strength in the yen today is limiting the upside for the dollar.

EUR/USD (^EURUSD) today is down by -0.39%. Comments today from ECB Governing Council member de Cos weighed in the euro when he said European government support measures to help economies through the energy crisis should be gradually rolled back as prices fall. Reducing government support might undercut economic activity that would be bearish for the euro. Hawkish comments from ECB Executive Board member Schnabel and ECB Governing Council member Vujcic limited losses in EUR/USD as they both said they support tighter ECB policy.

Italy Dec industrial production rose +1.6% m/m, stronger than expectations of +0.1% m/m.

ECB Executive Board member Schnabel said the ECB "will keep interest rates high until we see robust evidence that underlying inflation returns to our target in a timely and durable manner."

ECB Governing Council member de Cos said European government support measures to help economies through the energy crisis should be gradually rolled back as prices fall.

ECB Governing Council member Vujcic said the ECB would probably continue raising interest rates after a planned 50 bp rate hike at next month's policy meeting.

USD/JPY (^USDJPY) today is down by -0.29%. The yen today is moderately higher. The yen is climbing today after Japanese Prime Minister Kishida nominated former BOJ member Ueda to be BOJ Governor after Deputy BOJ Governor Amamiya turned down an offer for the post. Ueda is considered more hawkish than Amamiya.

Today’s Japanese economic news was dovish for BOJ policy and bearish for the yen after Japan's Jan PPI rose +9.5% y/y, weaker than expectations of +9.7% y/y and the slowest pace of increase in 6 months.

April gold (GCJ3) this morning is down -5.1 (-0.27%), and March silver (SIH23) is down -0.013 (-0.06%). Precious metals prices this morning are slightly lower. A stronger dollar today is weighing on metals prices. Also, higher global bond yields today are bearish for metals. In addition, hawkish comments from ECB Executive Board member Schnabel and ECB Governing Council member Vujcic undercut precious metals when they both said they supported tighter ECB policy.

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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.