S&P 500 and Nasdaq 100 Post Record Highs on Solid Earnings

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Thursday closed up +0.06%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.13%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.16%.

Stocks on Thursday settled slightly higher, with the S&P 500 and Nasdaq 100 posting new record highs.  Stock indexes eked out modest gains Thursday on some solid corporate earnings results and strength in chip stocks.  Stock gains were limited as signs of strength in the U.S. labor market and hawkish Fed comments pushed T-note yields higher.

On the positive side, Walt Disney closed up more than +11% after reporting stronger-than-expected Q1 adjusted EPS and forecasting full-year adjusted EPS above consensus.  Also, Ralph Lauren surged more than +16% after reporting Q3 total comparable sales ex-forex well above consensus.

On the negative side, PayPal Holdings closed down more than -11% after reporting fewer than expected Q4 active customer accounts and forecasting full-year adjusted EPS below consensus.  Also, FleetCor Technologies closed down more than -9% after reporting Q4 revenue well below consensus and forecasting weaker-than-expected 2024 revenue.

U.S. weekly initial unemployment claims fell -9,000 to 218,000, showing a stronger labor market than expectations of 220,000.  Also, weekly continuing claims fell -23,000 to 1,871 million, showing a stronger labor market than expectations of 1.875 million.

Richmond Fed President Barkin said the Fed doesn't have to be in a hurry to cut interest rates, and he would like to see disinflation for a few more months before cutting rates.

The markets are discounting the chances for a -25 bp rate cut at 21% at the March 19-20 FOMC meeting and 74% for that -25 bp rate cut at the following meeting April 30-May 1.

U.S. and European government bond yields on Thursday moved higher.  The 10-year T-note rose +4.5 bp to 4.166%.  The 10-year German bund yield rose to a 2-week high of 2.360% and finished up +3.7 bp at 2.354%.  The 10-year UK gilt yield rose to a 2-week high of 4.060% and finished up +6.3 bp at 4.051%.   

China Jan CPI fell -0.8% y/y, weaker than expectations of -0.5% y/y and the steepest pace of decline in 14 years.  Jan PPI fell 2.5%y/y, a smaller decline than expectations of -2.6% y/y.

ECB Chief Economist Lane said the ECB requires more assurance that inflation is returning to its target before policymakers are able to lower interest rates.

ECB Governing Council member Wunsch said he favors waiting for more data before deciding to cut interest rates as wage growth in the Eurozone is running at a level that's not compatible with the ECB's 2% inflation target.

Overseas stock markets on Thursday settled higher.  The Euro Stoxx 50 closed up +0.68%.  China’s Shanghai Composite Index closed up +1.28%. Japan’s Nikkei Stock Index closed up +2.06%.

Today’s stock movers…

Ralph Lauren (RL) closed up more than +16% to lead gainers in the S&P 500 after reporting Q3 total comparable sales ex-forex rose +9%, much stronger than the consensus of +4.69%.

Monolithic Power Systems (MPWR) closed up more than +14% after reporting Q4 revenue of $454 million, above the consensus of $452.5 million, and forecast Q1 revenue of $437 million-$457 million, stronger than the consensus of $436.6 million. 

Walt Disney (DIS) closed up more than +11% to lead gainers in the Dow Jones Industrials after reporting Q1 adjusted EPS of $1.22, better than the consensus of 99 cents, and forecast full-year adjusted EPS of about $4.60, stronger than the consensus of $4.27.

News Corp (NWS) closed up more than +6% after reporting Q2 revenue of $2.59 billion, above the consensus of $2.57 billion.

Tapestry (TPR) closed up more than +6% after reporting Q2 net sales of $2.08 billion, stronger than the consensus of $2.06 billion.

Wynn Resorts (WYNN) closed up more than +6% after reporting Q4 operating revenue of $1.84 billion, stronger than the consensus of $1.74 billion. 

Strength in chip stocks is supportive of the overall market.  On Semiconductor (ON) closed up more than +5% to lead gainers in the Nasdaq 100.  Also, Globalfoundries (GFS) closed up more than +4%, and NXP Semiconductors NV (NXPI) closed up more than +3%.  In addition, Marvell Technology (MRVL) closed up more than +2%. 

Masco (MAS) closed up more than +4% after reporting Q4 net sales of $1.88 billion, better than the consensus of $1.79 billion.

PayPal Holdings (PYPL) closed down more than -11% to lead losers in the S&P 500 and Nasdaq 100 after reporting Q4 active customer accounts of 426 million, below the consensus of 427.98 million, and forecast full-year adjusted EPS of $5.10, weaker than the consensus of $5.49. 

FleetCor Technologies (FLT) closed down more than -9% after reporting Q4 revenue of $937.3 million, well below the consensus of $970.5 million, and forecast 2024 revenue of $4.04 billion-$4.12 billion, weaker than the consensus of $4.14 billion. 

Everest Group Ltd (EG) closed down more than -7% after reporting Q4 revenue of $3.66 billion, below the consensus of $3.87 billion.

BorgWarner (BWA) closed down more than -7% after reporting Q4 net sales of $3.52 billion, weaker than the consensus of $3.63 billion. 

Kenvue (KVUE) closed down more than -5% after forecasting full-year adjusted EPS of $1.10-$1.20 weaker than the consensus of $1.25. 

S&P Global (SPGI) closed down more than -4% after forecasting 2024 pro forma adjusted EPS of $13.75-$14.00, weaker than the consensus of $14.45. 

AstraZeneca Plc (AZN) closed down more than -4% after reporting Q4 core EPS of $1.45, below the consensus of $1.51.

O’Reilly Automotive (ORLY) closed down more than -4% after reporting Q4 comparable sales of +3.4%, weaker than the consensus of +3.74%.

Across the markets…

March 10-year T-notes (ZNH24) on Thursday closed down -14 ticks, and the 10-year T-note yield rose by +4.5 bp to 4.166%.  Mar T-note prices on Thursday posted moderate losses and were undercut by negative carryover after 10-year German bund and 10-year UK gilt prices fell to 2-week lows.   T-notes were also under pressure from Thursday’s weekly jobless claims report that showed claims fell more than expected, a hawkish factor for Fed policy. In addition, comments from Richmond Fed President Barkin weighed on T-notes when he said the Fed doesn't have to be in a hurry to cut interest rates.

A supportive factor for T-notes was strong demand for the Treasury’s $25 billion 30-year T-bond auction. The auction was awarded at 4.360%, below the 4.380% when-issued yield at the 1 pm EST bidding deadline and a sign of solid demand.

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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.