Skip to main content

Vulcan Materials Company(VMC-N)
NYSE

Today's Change
Real-Time Last Update Last Sale Cboe BZX Real-Time

Stocks Slump as Fed Officials Mention Bigger Rate Hikes

Barchart - Thu Feb 16, 2023

What you need to know…

The S&P 500 Index ($SPX) (SPY) Thursday closed down -1.38%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -1.26%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.93%.

Stock indexes Thursday posted moderate losses.  Stocks were under pressure Thursday after the U.S. Jan PPI report was stronger than expected.  The report showed persistent inflation pressure that was hawkish for Fed policy. Stock indexes extended their losses Thursday on hawkish comments from Cleveland Fed President Mester and St. Louis Fed President Bullard, who said they could support a 50 bp rate hike at the March FOMC meeting.

Thursday’s larger-than-expected increase in U.S. Jan producer prices and hawkish comments from Cleveland Fed President Mester St. Louis Fed President Bullard pushed the 10-year T-note yield up to a 1-1/2 month high of 3.871%.

U.S Jan final-demand PPI rose +0.7% m/m and +6.0% y/y, stronger than expectations of +0.4% m/m and +5.4% y/y.  Also, Jan PPI ex-food and energy rose +0.5% m/m and +5.4% y/y, stronger than expectations of +0.3% m/m and +4.9% y/y.

Cleveland Fed President Mester said she saw a "compelling" case for a +50 bp rate hike at the last FOMC meeting, and "at this juncture, the incoming data have not changed my view that we will need to bring the fed funds rate above 5% and hold it there for some time."

St. Louis Fed President Bullard said, "continued policy rate increases can help lock in a disinflationary trend during 2023, even with ongoing growth and strong labor markets, by keeping inflation expectations low."  He added that he "has argued consistently for front-loading of monetary policy" and "wouldn't rule out a 50 bp rate hike" at the March FOMC meeting.

Negative corporate earnings results also weighed on stock indexes. Organon & Co closed down -15% after reporting disappointing Q4 revenue.  Also,  Host Hotels & Resorts closed down more than -5% after forecasting weaker-than-expected 2023 AFFO/share.  In addition, Paramount Global and Vulcan Materials closed down more than -4% after reporting weaker-than-expected Q4 revenue.

On the positive side, West Pharmaceutical Services closed up more than +14%, and Albemarle closed up more than +5% after reporting better-than-expected Q4 adjusted EPS.  Also, Cisco Systems closed up more than +5% after reporting stronger-than-expected Q2 revenue.  In addition, Seagen and Twilio closed up more than +13% after reporting Q4 revenue above estimates.

Other U.S. economic reports were mixed for stocks.  On the weak side, Jan housing starts fell -4.5% m/m to a 2-1/2 year low of 1.309 million, weaker than expectations of 1.356 million.  Also, the Feb Philadelphia Fed business outlook survey unexpectedly fell -15.4 to a 2-3/4 year low of -24.3, weaker than expectations of -7.5.  Conversely, initial weekly unemployment claims unexpectedly fell -1,000 to 194,000, showing a stronger labor market than expectations of an increase to 200,000.

Strength in European stocks provided carry-over support to U.S. stock indexes, with the Euro Stoxx 50 closing +0.40% at a 13-month high. Meanwhile, China’s Shanghai Composite stock index closed down -0.96%, and Japan’s Nikkei Stock index closed up +0.71%. 

Today’s stock movers…

Organon & Co (OGN) closed down -15% to lead losers in the S&P 500 after reporting Q4 revenue of $1.49 billion, below the consensus of $1.51 billion, and forecast 2023 revenue of $6.15 billion-$6.45 billion, with the midpoint below the consensus of $6.32 billion. 

Etsy (ETSY) closed down more than -8% after Citron Research warned investors to be cautious of the stock and said that Etsy had become the largest organized clearing house for counterfeit goods in the world and the company’s management has not done enough to control the problem.

Datadog (DDOG) closed down more than -7% to lead losers in the Nasdaq 100 after forecasting 2023 adjusted EPS of $1.02-$1.09, weaker than the consensus of $1.12. 

Henry Schein (HSIC) closed down more than -6% after it said guidance for 2023 GAAP diluted EPS is not being provided at this time as the company is unable to provide, without unreasonable effort, an estimate of integration and restructuring costs.

Tesla (TSLA) closed down more than -5% after recalling 362,758 cars after U.S. authorities said the company’s automated-driving technology could increase the risk of a crash. 

Synopsys (SNPS) closed down more than -5% after forecasting Q2 revenue of $1.36 billion-$1.39 billion, below the consensus of $1.43 billion. 

Host Hotels & Resorts (HST) closed down more than -5% after forecasting 2023 AFFO/share of $1.60 to $1.83, the midpoint weaker than the consensus of $1.81.

Vulcan Materials (VMC) closed down more than -5% after reporting Q4 revenue of $1.73 billion, well below the consensus of $1.84 billion, and forecasting 2023 adjusted Ebitda of $1.73 billion-$1.88 billion, with the midpoint below the consensus of $1.87 billion.

Paramount Global (PARA) closed down more than -4% after reporting Q4 revenue of $8.13 billion, weaker than the consensus of $8.17 billion. 

Nvidia (NVDA) closed down more than -3% after DZ Bank AG downgraded the stock by two notches to sell from buy.

West Pharmaceutical Services (WST) closed up more than +14% to lead gainers in the S&P 500 after reporting Q4 adjusted EPS of $1.77, well above the consensus of $1.38 and forecast 2023 adjusted EPS of $7.25-$7.40, stronger than the consensus of $7.23.

Cisco Systems (CSCO) closed up more than +5% to lead gainers in the Dow Jones Industrials after reporting Q2 revenue of $13.59 billion, above the consensus of $13.43 billion, and raised its full-year revenue forecast to +9% to +10.5% from a previous estimate of +4.5% to +6.5%, stronger than the consensus of +5.7%.

Seagen (SGEN) closed up more than +13% to lead gainers in the Nasdaq 100 after reporting Q4 revenue of $528 million, well above the consensus of $480.8 million. 

Albemarle (ALB) closed up more than +4% after reporting Q4 adjusted EPS of $8.62, stronger than the consensus of $8.19 and forecast full-year adjusted EPS of $26.00-$33.00, the midpoint above the consensus of $28.17. 

Twilio (TWLO) closed up more than +14% after reporting Q4 revenue of $1.02 billion, above the consensus of $1.00 billion, and authorizing a $1 billion share buyback program. 

Republic Services (RSG) closed up more than +3% after reporting Q4 adjusted EPS of $1.13, stronger than the consensus of $1.01, and forecasting 2023 adjusted EPS of $515-$5.23, above the consensus of $5.04.

Marathon Oil (MRO) closed up more than +2% after reporting Q4 adjusted EPS of 88 cents, above the consensus of 84 cents.

Across the markets…

March 10-year T-notes (ZNH23) on Thursday closed down -5 ticks, and the 10-year T-note yield rose by +4.4 bp to 3.849%.  Mar 10-year T-notes Thursday sold off to a 3-1/4 month low, and the 10-year T-note rose to a 1-1/2 month high of 3.871%.  Stronger-than-expected PPI and unemployment claims reports bolstered the case for tighter Fed policy and weighed on T-note prices. 

Losses in T-notes accelerated Thursday on hawkish comments from Cleveland Fed President Mester and St. Louis Fed President Bullard, who signaled they might support larger interest rate hikes in the future.   Also, the jump in the 10-year German bund yield Thursday to a 1-1/2 month high of 2.520% undercut T-note prices.



More Stock Market News from Barchart
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.

More from The Globe

watchlist
25 stocks most added to Watchlists