What you need to know…
The S&P 500 Index ($SPX) (SPY) on Thursday closed up +1.25%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.97%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.21%.
Stocks on Thursday closed moderately higher as they recovered most of Wednesday’s sharp losses that occurred when Fed Chair Powell said he doesn’t see a Fed rate cut in March. Thursday’s Fed-friendly economic reports knocked the 10-year T-note yield down to a 5-week low and supported stocks. Weekly jobless claims unexpectedly rose to a 2-1/2 month high, and Q4 nonfarm productivity rose more than expected, dovish factors for Fed policy.
Stocks maintained their gains on improved prospects for a soft landing after the Jan ISM manufacturing index unexpectedly rose to a 15-month high.
On the negative side was weakness in regional bank stocks, as New York Community Bancorp fell more than -11% to a 23-year low, adding to Wednesday’s -37% plunge after slashing its dividend and raising its provision for loan losses to $552 million, largely due to exposure to commercial property loans.
After Thursday's close, the earnings results from Apple, Amazon.com, and Meta Platforms will steer market direction tomorrow, along with the monthly U.S. payroll report.
U.S. weekly initial unemployment claims unexpectedly rose +9,000 to a 2-1/2 month high of 224,000, showing a weaker labor market than expectations of a decline to 212,000.
U.S. Q4 nonfarm productivity rose +3.2%, stronger than expectations of +2.5%. Q4 unit labor costs rose +0.5%, weaker than expectations of +1.2%.
The U.S. Jan ISM manufacturing index unexpectedly rose +2.0 to a 15-month high of 49.1, stronger than expectations of a decline to 47.2.
U.S. Dec construction spending rose +0.9% m/m, stronger than expectations of +0.5% m/m.
The markets are discounting the chances for a -25 bp rate cut at 40% at the March 19-20 FOMC meeting and have more than fully discounted (136%) the chance for that same -25 bp rate cut by the following meeting on April 30-May 1.
U.S. and European government bond yields Thursday moved lower. The 10-year T-note yield fell to a 5-week low of 3.815% and finished down -5.0 bp at 3.862%. The 10-year German bund yield fell to a 4-week low of 2.119% and finished down -1.7 bp at 2.149%. The 10-year UK gilt yield fell to a 3-1/2 week low of 3.726% and finished down -4.9 bp at 3.746%.
As expected, the Bank of England (BOE) kept the bank rate unchanged at 5.25%. The BOE dropped its reference for further tightening but said more evidence of moderating inflation was needed before it could start cutting interest rates.
Eurozone Jan CPI eased to +2.8% y/y from +2.9% y/y in Dec, stronger than expectations of +2.7% y/y. Jan core CPI eased to +3.3% y/y from +3.4% y/y in Dec, stronger than expectations of +3.2% y/y.
Overseas stock markets on Thursday settled lower. The Euro Stoxx 50 closed down -0.21%. China’s Shanghai Composite Index closed down -0.64%. Japan’s Nikkei Stock Index closed down -0.76%.
Today’s stock movers…
Corteva (CTVA) closed up more than +18% to lead gainers in the S&P 500 after reporting Q4 adjusted EPS of 15 cents, better than the consensus of 6 cents, and forecasting 2024 operating Ebitda of $3.5 billion-$3.7 billion, the midpoint above the consensus of $3.56 billion.
Etsy (ETSY) closed up more than +9% after naming Elliot Investment Management’s Marc Steinberg to its board of directors.
Norfolk Southern (NSC) closed up more than +8% after the Wall Street Journal reported that an Ancora-led group has built up a $1 billion stake in the company.
Parker-Hannifin (PH) closed up more than +7% after reporting Q2 adjusted EPS of $6.15, well above the consensus of $5.28, and raised its full-year adjusted EPS forecast to $23.90-$24.50 from a previous forecast of $22.60-$23.40.
Trane Technologies Plc (TT) closed up more than +7% at a record high after reporting Q4 adjusted EPS continuing operations of $2.17, stronger than the consensus of $2.13, and forecast 2024 adjusted EPS continuing operations of $10.00-$10.30, above the consensus of $10.05.
Eaton Corp (ETN) closed up more than +7% after reporting Q4 net sales of $5.97 billion, stronger than the consensus of $5.91 billion.
Qorvo (QRVO) closed up more than +6% after reporting Q3 adjusted revenue of $1.07 billion, stronger than the consensus of $1.00 billion, and forecast Q4 revenue of $900 million-$950 million, the midpoint above the consensus of $914.6 million.
Merck & Co (MRK) closed up more than +4% to lead gainers in the Dow Jones Industrials after reporting Q4 sales of $14.63 billion, above the consensus of $14.49 billion, and forecasting 2024 sales of $62.7 billion-$64.2 billion, the midpoint above the consensus of $63.42 billion.
C. H. Robinson (CHRW) closed down more than -12% to lead losers in the S&P 500 after reporting Q4 EPS of 26 cents, well below the consensus of 80 cents.
Aflac (AFL) closed down more than -9% after reporting Q4 revenue of $3.78 billion, below the consensus of $4.33 billion.
Regional bank stocks tumbled Thursday on concerns a worsening of the commercial real estate market will force more banks to boost their loan loss provisions after New York Community Bancorp on Wednesday slashed its dividend and raised its provision for loan losses to $552 million, largely due to exposure to commercial property loans. As a result, New York Community Bancorp (NYCB) closed down more than -11%. Also, Zions Bancorp (ZION) closed down more than -6%, and M&T Bank (MTB) and Citizens Financial Group (CFG) closed down more than -4%. In addition, Comerica (CMA), Regions Financial (RF), and Huntington Bancshares (HBAN) closed down more than -2%.
MetLife (MET) closed down more than -5% after reporting Q4 adjusted EPS of $1.83, weaker than the consensus of $1.87.
Qualcomm (QCOM) closed down more than -4% to lead losers in the Nasdaq 100 despite reporting better-than-expected Q1 earnings, after company executives warned of high inventory levels and said it’s expecting only a modest recovery for the industry this year.
International Paper (IP) closed down more than -4% after reporting Q4 net sales of $4.60 billion, weaker than the consensus of $4.67 billion.
Honeywell International (HON) closed down more than -2% to lead losers in the Dow Jones Industrials after reporting Q4 sales of $9.44 billion, weaker than the consensus of $9.70 billion, and forecasting full-year sales of $38.1 billion-$38.9 billion, below the consensus of $39.01 billion.
Bio-Techne (TECH) closed down more than -2% after reporting Q2 adjusted EPS of 40 cents, weaker than the consensus of 42 cents.
Across the markets…
March 10-year T-notes (ZNH24) on Thursday closed up +18 ticks, and the 10-year T-note yield fell by -5.0 bp to 3.862%. Mar T-notes on Thursday rallied to a 5-week high, and the 10-year T-note yield dropped to a 5-week low of 3.815%. T-notes rallied Thursday after weekly U.S. jobless claims unexpectedly rose to a 2-1/2 month high, and after Q4 nonfarm productivity rose more than expected, dovish factors for Fed policy. Also, a decline in inflation expectations boosted T-notes after the 10-year breakeven rate fell to a 1-month low of 2.181%. In addition, a slump in regional bank stocks Thursday from the fallout in U.S. commercial property losses sparked some safe-haven demand for T-notes.
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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.
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