Stocks Waver on Lower Bond Yields and Mixed Corporate Earnings

Rich Asplund - Barchart - Tue Feb 6, 10:06AM CST

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.01%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.23%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.36%.

Stock indexes this morning are mixed. Stocks lack direction as lower bond yields today offset mixed corporate earnings results. GE Healthcare Technologies is up more than +11% after reporting better-than-expected Q4 adjusted EPS and forecasting 2024 adjusted EPS above consensus. Also, Dupont de Nemours is up more than +6% after reporting Q4 adjusted EPS above consensus and announcing a new $1 billion share buyback program.

On the negative side, FMC Corp is 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.

The markets are discounting the chances for a -25 bp rate cut at 23% at the March 19-20 FOMC meeting and 79% for that -25 bp rate cut at the following meeting April 30-May 1.

U.S. and European government bond yields today are mixed. The 10-year T-note is down -4.4 bp at 4.114%. The 10-year German bund yield climbed to a 1-1/2 week high of 2.344% but fell back and is down -2.3 bp at 2.292%. The 10-year UK gilt yield is down -5.8 bp at 3.949%.

Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.70%. 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) is 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) is up more than +6% 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) is up more than +5% after reporting Q4 adjusted operating margin of 34.2%, stronger than the consensus of 33.2%.

Linde Plc (LIN) is up more than +4% after reporting Q4 sales of $8.30 billion, stronger than the consensus of $8.07 billion.

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

Palantir (PLTR) is 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.

Eli Lilly (LLY) is up more than +1% after reporting Q4 revenue of $9.35 billion, better than the consensus of $8.96 billion, and forecast 2024 revenue of $40.4 billion-$41.6 billion, well above the consensus of $39.52 billion.

NXP Semiconductors NV (NXPI) is up more than +1% after reporting Q4 revenue of $3.42 billion, above the consensus of $3.39 billion.

FMC Corp (FMC) is down more than -9 % 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.

Fiserv (FI) is down more than -4% after reporting Q4 payments revenue of $1.72 billion, weaker than the consensus of $1.75 billion.

ON Semiconductor (ON) is down more than -3% after Fubon Securities downgraded the stock to neutral from buy.

Amkor Technology (AMKR) is down more than -4% after forecasting Q1 net sales of $1.30 billion-$1.40 billion, weaker than the consensus of $1.51 billion.

Carrier Global (CARR) is down more than -2% after reporting Q4 sales of $51.0 billion, weaker than the consensus of $5.24 billion.

Gartner (IT) is down more than -2% after forecasting 2024 revenue of at least $6.24 billion, below the consensus of $6.35 billion.

MarketAxcess Holdings (MKTX) is down more than -2% after UBS cut its price target on the stock to $305 from $335.

McDonald’s (MCD) is down more than -1% after BTIG downgraded the stock to neutral from buy.

Across the markets…

March 10-year T-notes (ZNH24) this morning are up by +10 ticks, and the 10-year T-note yield is down -4.4 bp at 4.114%. Mar T-note prices this morning are moderately higher on some light short-covering following the rout seen over the past two sessions. Gains are limited due to negative carryover from a decline in 10-year German bunds to a 1-1/2 week low. Also, supply pressures are weighing on T-notes as the Treasury will auction $54 billion of 3-year T-notes later today as part of this week’s $121 auctions of T-notes and T-bonds for the February quarterly refunding.

The dollar index (DXY00) today is down -0.07%. The dollar is slightly weaker as it consolidates below Monday’s 2-1/2 month high. Today’s decline in T-note yields is a negative factor for the dollar. Also, the strength in stocks today has curbed the liquidity demand for the dollar. Recent hawkish Fed comments and strong U.S. economic news have cut the chances of a Fed rate cut at the March FOMC meeting to 190% from 70% last month and are supportive of the dollar.

EUR/USD (^EURUSD) is down by -0.05% and matched Monday’s 2-1/2 month low. The euro is slightly lower today after Eurozone Dec retail sales fell more than expected and after the ECB’s Dec 1-year inflation expectations eased to +3.2% from +3.5% in Nov, the slowest pace of increase in 1-3/4 years and dovish for ECB policy. Losses in the euro are contained after German Dec factory orders unexpectedly rose by the most in 3-1/2 years.

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.

Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 14% for its next meeting on March 7 and at 66% for the following meeting on April 11.

USD/JPY (^USDJPY) is down by -0.16%. The yen today is moving higher and is consolidating above Monday’s 2-1/4 month low against the dollar. Lower T-note yields today are boosting the yen. Weaker-than-expected Japanese economic news today on household spending and wages limits the yen's upside.

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

Japan Dec labor cash earnings rose +1.05 y/y, weaker than expectations of +1.4% y/y. Also, Dec real cash earnings fell -1.9% y/y, weaker than expectations of -1.5% y/y.

Swaps are pricing in the chances for a +10 bp BOJ rate hike at 20% for its next meeting on March 19 and at 83% for the following meeting on April 26.

April gold (GCJ24) this morning is up +5.4 (+0.26%), and Mar silver (SIH24) is up +0.033 (+0.15%). Gold and silver prices this morning are slightly higher. A weaker dollar today is supportive of metals. Also, a decline in T-note yields is bullish for precious metals. Silver garnered support today after German Dec factory orders unexpectedly rose by the most in 3-1/2 years, a sign of strength in industrial metals demand. Gains in precious metals are limited as recent hawkish Fed comments and stronger-than-expected U.S. economic news have pushed back expectations for the Fed to cut interest rates from March to May. Also, gold is still weighed down from 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.