The S&P 500 Index ($SPX) (SPY) Friday closed down -0.95%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.99%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.30%. March E-mini S&P futures (ESH25) fell by -0.90%, and March E-mini Nasdaq futures (NQH25) fell by -1.30%.
Stock indexes on Friday gave up early gains and turned lower after the University of Michigan US Feb consumer sentiment index unexpectedly fell to a 7-month low and the University of Michigan US Feb inflation expectations unexpectedly increased. Also, higher bond yields Friday weighed on stocks. Bond yields rose Friday after the US Jan unemployment rate unexpectedly fell to an 8-month low, and Jan average hourly earnings rose more than expected, hawkish factors for Fed policy. The higher bond yields sparked a slide in chip makers and homebuilding stocks.
Losses in stock indexes accelerated Friday afternoon after President Trump said he will unveil reciprocal tariffs on "everyone" next week to ensure the US is treated evenly with other countries, without specifying nations involved.
Corporate earnings results on Friday were mixed. Amazon.com closed down more than -4% after giving an outlook that was weaker than expected. Also, Microchip Technology closed down more than -2% after forecasting Q4 net sales below consensus. On the positive side, Expedia Group closed up more than +17% after reporting Q4 earnings well above consensus. Also, Take-Two Interactive Software closed up more than +14% after forecasting full-year adjusted Ebitda above consensus and reiterating its plan to launch Grand Theft Auto VI in the fall of 2025.
US Jan nonfarm payrolls rose +143,000, weaker than expectations of +175,000, but Dec was revised upward to +307,000 from the previously reported +256,000. The Jan unemployment rate unexpectedly fell -0.1 to an 8-month low of 4.0%, showing a stronger labor market than expectations of no change at 4.1%.
US Jan average hourly earnings rose +0.5% m/m and +4.1% y/y, stronger than expectations of +0.3% m/m and +3.8% y/y.
The University of Michigan US Feb consumer sentiment index unexpectedly fell -3.3 to a 7-month low of 67.8, weaker than expectations of an increase to 71.8.
The University of Michigan US Feb 1-year inflation expectations unexpectedly jumped to a 15-month high of 4.3% versus expectations of no change at 3.3%. Also, the Feb 5-10 inflation expectations unexpectedly increased to a 16-year high of 3.3%, stronger than expectations of no change at 3.2%.
US Dec consumer credit surged a record +$40.847 billion, stronger than expectations of +$15.45 billion.
Fed comments were mixed for stocks. Thursday evening, Dallas Fed President Logan said interest rates might already be near a neutral level, potentially obviating the need for further Fed rate cuts even if inflation continues to cool. Conversely, Minneapolis Fed President Kashkari said Friday he expects inflation will continue to cool toward the Fed's 2% target, allowing policymakers to lower interest rates "modestly" by the end of the year.
Earnings season is in full swing as companies report Q4 earnings results. According to Bloomberg Intelligence, analysts estimate S&P 500 earnings grew by +7.5% y/y in Q4, the second-highest pre-season forecast in the past three years.
The markets are discounting the chances at 10% for a -25 bp rate cut at the next FOMC meeting on March 18-19.
Overseas stock markets on Friday settled mixed. The Euro Stoxx 50 closed down -0.58%. China's Shanghai Composite Index climbed to a 5-week high and closed up +1.01%. Japan's Nikkei Stock 225 closed down -0.72%.
Interest Rates
March 10-year T-notes (ZNH25) Friday closed down by -11 ticks. The 10-year T-note yield rose by +4.9 bp to 4.483%. March T-notes Friday whipsawed to a 1-1/2 month high and then retreated, and the 10-year T-note yield rebounded from a 1-1/2 month low of 4.380% and moved higher. T-notes initially spiked higher Friday on the smaller-than-expected increase in US Jan nonfarm payrolls but reversed and sold off after the Jan unemployment rate unexpectedly fell to an 8-month low and Jan average hourly earnings rose more than expected, hawkish factors for Fed policy. T-note losses accelerated Friday after the University of Michigan US Feb inflation expectations unexpectedly increased.
T-notes recovered from their worst levels Friday after a slump in stock boosted safe-haven demand for government debt. Also, dovish comments from Minneapolis Fed President Kashkari Hawkish were supportive of T-notes when he said slowing inflation would allow policymakers to lower interest rates "modestly" by the end of the year.
European government bond yields on Friday moved lower. The 10-year German bund yield fell -0.7 bp to 2.372%. The 10-year UK gilt yield fell -0.8 bp to 4.476%.
German Dec industrial production fell -2.4% m/m, weaker than expectations of -0.7% m/m and the biggest decline in 5 months.
German trade news was better than expected as Dec exports unexpectedly rose +2.9% m/m, stronger than expectations of a -0.5% m/m decline and the biggest increase in 11 months. Also, Dec imports rose +2.1% m/m, stronger than expectations of +1.9% m/m and the biggest increase in 5 months.
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at the March 6 policy meeting.
US Stock Movers
Amazon.com (AMZN) closed down more than -4% after forecasting Q1 net sales of $151.0 billion-$155.5 billion, weaker than the consensus of $158.64 billion.
Homebuilding stocks retreated Friday on the jump in T-note yields and slide in US consumer sentiment, bearish factors for housing demand. As a result, Toll Brothers (TOL) closed down more than -6%, and DR Horton (DHI) closed down more than -5%. Also, KB Home (KBH) and Lennar (LEN) closed down more than -4%, and PulteGroup (PHM) closed down more than -3%.
Higher T-note yields on Friday weighed on chip stocks. Marvell Technology (MRVL) closed down more than -7% to lead losers in the Nasdaq 100. Also, ARM Holdings Plc (ARM), Advanced Micro Devices (AMD), Broadcom (AVGO), Micron Technology (MU), and ON Semiconductor (ON) closed down more than -2%. In addition, Applied Materials (AMAT), Intel (INTC), KLA Corp (KLAC), NXP Semiconductor NV (NXPI), GlobalFoundries (GFS), and Texas Instruments (TXN) closed down more than -1%.
Air Products & Chemicals (APD) closed down more than -5% after JPMorgan Chase downgraded the stock to neutral from overweight.
Elf Beauty (ELF) closed down more than -19% after reporting Q3 adjusted EPS of 74 cents, below the consensus of 77 cents, and cut its full-year adjusted EPS forecast to $3.27-$3.32 from a previous forecast of $3.47-$3.53, well below the consensus of $3.61. Also, Ulta Beauty (ULTA) closed down more than -6% on the news to lead losers in the S&P 500.
Nike (NKE) closed down more than -4% to lead losers in the Dow Jones Industrials after Citigroup downgraded the stock to neutral from buy.
Skechers USA (SKX) closed down more than -12% after forecasting full-year sales of $9.70 billion-$9.80 billion, weaker than the consensus of $9.87 billion.
BILL Holdings (BILL) closed down more than -35% after forecasting Q3 total revenue of $352.5 million-$357.5 million, below the consensus of $361.3 million.
Microchip Technology (MCHP) closed down more than -2% after forecasting Q4 net sales of $920 million-$1.0 billion, below the consensus of $1.05 billion.
Expedia Group (EXPE) closed up more than +17% to lead gainers in the S&P 500 after reporting Q4 revenue of $3.18 billion, stronger than the consensus of $3.07 billion.
Take-Two Interactive Software (TTWO) closed up more than +14% to lead gainers in the Nasdaq 100 after forecasting full-year adjusted Ebitda of $723 million-$777 million, the midpoint above the consensus of $748.3 million and reiterating its plan to launch Grand Theft Auto VI in fall of 2025.
Monolithic Power Systems (MPWR) closed up more than +8% after reporting Q4 revenue of $621.7 million, stronger than the consensus of $608.1 million, and forecast Q1 revenue of $610.0 million-$630.0 million, well above the consensus of $582.8 million.
Affirm Holdings (AFRM) closed up more than +21% after reporting Q2 revenue of $866 million, well above the consensus of $809.5 million, and forecast full-year revenue of $3.13 billion-$3.19 billion, stronger than the consensus of $3.12 billion.
Pinterest (PINS) closed up more than +18% after reporting Q4 revenue of $1.15 billion, better than the consensus of $1.14 billion, and forecast Q1 revenue of $837 million-$852 million, stronger than the consensus of $835 million.
Cloudflare (NET) closed up more than +17% after reporting Q4 revenue of $459.9 million, better than the consensus of $452.3 million.
Uber Technologies (UBER) closed up more than +6% after Pershing Square Capital Management said it had amassed a 30.3 million share stake in the company.
Principal Financial Group (PFG) closed up more than +2% after reporting Q4 assets under management of $712.1 billion, above the consensus of $707.6 billion.
Freeport-McMoRan (FCX) closed up more than +2% to lead mining stocks higher as the price of copper jumped more than +3% to a 4-month high.
Earnings Reports (2/10/2025)
Arch Capital Group Ltd (ACGL), Cincinnati Financial Corp (CINF), Incyte Corp (INCY), Loews Corp (L), McDonald's Corp (MCD), ON Semiconductor Corp (ON), Rockwell Automation Inc (ROK), Vertex Pharmaceuticals Inc (VRTX).
