The S&P 500 Index ($SPX) (SPY) Wednesday closed down -0.27%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.50%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.12%. March E-mini S&P futures (ESH25) are down by -0.29%, and March E-mini Nasdaq futures (NQH25) are up by +0.16%.
Stock indexes on Wednesday settled mixed, with the S&P 500 and Dow Jones Industrials falling to 1-week lows. Stocks were under pressure on Wednesday after bond yields surged when US Jan consumer prices rose more than expected. Wednesday’s stronger-than-expected Jan CPI report dampens the outlook for the Fed to cut interest rates and bolsters expectations for the Fed to keep rates on hold for the foreseeable future. On Wednesday, the rally in chip stocks helped stock indexes recover from their worst levels and pushed the Nasdaq 100 into positive territory.
US Jan CPI unexpectedly accelerated to +3.0% y/y from 2.9% y/y in Dec, stronger than expectations of no change at +2.9% y/y and the fastest pace of increase in 7 months. Jan CPI ex-food and energy unexpectedly accelerated to +3.3% y/y from 3.2% y/y in Dec, stronger than expectations of an easing to 3.1% y/y.
Fed Chair Powell said Wednesday’s consumer price data shows that while the Fed has made substantial progress toward taming inflation, “We want to keep policy restrictive for now.”
Corporate earnings results on Wednesday were mixed. On the negative side, Waters closed down more than -5% after forecasting weaker-than-expected Q1 adjusted EPS. Also, Biogen closed down more than -4% after forecasting 2025 adjusted EPS below consensus. On the positive side, CVS Health rose more than +14% after reporting better-than-expected Q4 comparable sales. Also, Gilead Sciences closed up more than +7% after reporting Q4 revenue above consensus.
US MBA mortgage applications rose +2.3% in the week ended February 7, with the purchase mortgage sub-index down -2.3% and the refinancing mortgage sub-index +9.6%. The average 30-year fixed rate mortgage fell -2 bp to 6.95% from 6.97% in the prior week.
The markets for the rest of this week will focus on Thursday’s US Jan PPI final demand report, expected unchanged from Dec at +3.3% y/y and Jan PPI ex-food and energy easing to +3.3% y/y from +3.5% y/y in Dec. On Friday, Jan retail sales is expected to fall -0.2% m/m and Jan manufacturing production is expected to climb +0.1% m/m.
Earnings season is in full swing as companies report Q4 earnings results. According to Bloomberg, more than 330 stocks in the S&P 500 have reported earnings, with 77.6% beating earnings estimates, just below the 3-year average of 78.4%.
The markets are discounting the chances at 2% for a -25 bp rate cut at the next FOMC meeting on March 18-19.
Overseas stock markets on Wednesday settled higher. The Euro Stoxx 50 climbed to a new 24-year high and closed up +0.27%. China’s Shanghai Composite Index rallied to a 5-week high and closed up +0.85%. Japan’s Nikkei Stock 225 closed up +0.42%.
Interest Rates
March 10-year T-notes (ZNH25) Wednesday closed down -22 ticks. The 10-year T-note yield rose +9.6 bp to 4.631%. March T-notes on Wednesday tumbled to a 3-1/2 week low, and the 10-year T-note yield rose to a 2-1/2 week high of 4.658% after US Jan consumer prices unexpectedly accelerated, signaling the Fed will keep interest rates higher for longer. Also, hawkish comments from Fed Chair Powell weighed on T-note prices when he said, “We want to keep policy restrictive for now.” In addition, a surge in inflation expectations is bearish for T-notes after the 10-year breakeven inflation rate on Wednesday jumped to a 23-month high of 2.525%. T-notes maintained moderate losses on weak demand for the Treasury’s $42 billion auction of 10-year T-notes with a bid-to-cover ratio of 2.48, below the 10-auction average of 2.53.
European government bond yields Wednesday moved higher. The 10-year German bund yield rose to a 1-1/2 week high of 2.488% and finished up +4.7 bp to 2.477%. The 10-year UK gilt yield climbed to a 1-1/2 week high of 4.579% and finished up +3.5 bp to 4.543%.
Italy’s Dec industrial production fell -3.1% m/m, weaker than expectations of -0.2% m/m and the largest decline in nearly 3 years.
ECB Governing Council member Holzmann said the ECB cutting interest rates by 50 bp this year to boost the economy is not a good decision as inflation in the Eurozone is still a threat due to tariffs.
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
Westinghouse Air Brake Technologies (WAB) closed down more than -8% to lead losers in the S&P 500 after forecasting 2025 sales of $10.73 billion-$11.03 billion, weaker than the consensus of $11.04 billion.
Waters (WAT) closed down more than -5% after forecasting Q1 adjusted EPS of $2.17-$2.25, below the consensus of $2.41.
Biogen (BIIB) closed down more than -4% to lead losers in the Nasdaq 100 after forecasting 2025 adjusted EPS of $15.25-$16.25, the midpoint weaker than the consensus of $16.16.
Energy stocks and energy service providers tumbled Wednesday after the price of WTI fell more than -2%. As a result, Valero Energy (VLO), Diamondback Energy (FANG), and APA Corp (APA) closed down more than -4%. Also, ConocoPhillips (COP), Exxon Mobil (XOM), Marathon Petroleum (MPC), Phillips 66 (PSX), and Devon Energy (DVN) closed down more than -3%.
Vertiv Holdings (VRT) closed down more than -10% after forecasting Q1 adjusted EPS of 57 cents-63 cents, the midpoint below the consensus of 63 cents.
Zillow Group (Z) closed down more than -9% after forecasting Q1 revenue of $575 million-$590 million, weaker than the consensus of $598.5 million.
Lyft Inc (LYFT) closed down more than -8% after forecasting Q1 gross bookings of $4.05 billion-$4.20 billion, weaker than the consensus of $4.23 billion.
Kraft Heinz (KHC) closed down more than -3% after forecasting 2025 adjusted EPS of $2.63-$2.74, well below the consensus of $3.05.
Martin Marietta Materials (MLM) closed down more than -2% after forecasting 2025 adjusted Ebitda of $2.15 billion-$2.35 billion, the midpoint below the consensus of $2.34 billion.
CVS Health (CVS) closed up more than +14% to lead gainers in the S&P 500 after reporting Q4 comparable sales rose +10.2%, well above the consensus of +7.71%.
Strength in chip makers lifted the Nasdaq 100 into positive territory. GlobalFoundries (GFS) closed up more than +8% to lead gainers in the Nasdaq 100, and Intel (INTC) closed up more than +7%. Also, ON Semiconductor (ON) closed up more than +4%, and Microchip Technology (MCHP) closed up more than +2%.
Gilead Sciences (GILD) closed up more than +7% to lead gainers in the Nasdaq 100 after reporting Q4 revenue of $7.57 billion, stronger than the consensus of $7.13 billion.
Generac Holdings (GNRC) closed up more than +7% after reporting Q4 adjusted EPS of $2.80, well above the consensus of $2.49.
Edwards Lifesciences (EW) closed up more than +6% after reporting Q4 adjusted EPS of 59 cents, better than the consensus of 55 cents.
NXP Semiconductors NV (NXPI) closed up more than +4% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $257.
DoorDash (DASH) closed up more than +4% after reporting Q4 marketplace gross order value of $21.28 billion, better than the consensus of $20.92 billion, and forecast Q1 marketplace gross order value of $22.6 billion-$23.0 billion, above the consensus of $22.43 billion.
Tesla (TSLA) closed up more than +2% after Benchmark initiated coverage on the stock with a buy recommendation and a price target of $475.
CME Group (CME) closed up more than +2% after reporting Q4 adjusted EPS of $2.52, better than the consensus of $2.44.
Confluent (CFLT) closed up more than +25% after reporting Q4 adjusted EPS of 9 cents, stronger than the consensus of 5.3 cents.
Earnings Reports (2/13/2025)
Airbnb Inc (ABNB), Ameren Corp (AEE), American Electric Power Co Inc (AEP), Applied Materials Inc (AMAT), CBRE Group Inc (CBRE), DaVita Inc (DVA), Deere & Co (DE), Dexcom Inc (DXCM), Digital Realty Trust Inc (DLR), DTE Energy Co (DTE), Duke Energy Corp (DUK), Federal Realty Investment Trust (FRT), GE HealthCare Technologies Inc (GEHC), Global Payments Inc (GPN), GoDaddy Inc (GDDY), Howmet Aerospace Inc (HWM), Ingersoll Rand Inc (IR), Iron Mountain Inc (IRM), Molson Coors Beverage Co (TAP), Moody’s Corp (MCO), Motorola Solutions Inc (MSI), Palo Alto Networks Inc (PANW), PG&E Corp (PCG), PPL Corp (PPL), Republic Services Inc (RSG), West Pharmaceutical Services Inc (WST), Wynn Resorts Ltd (WYNN), Zebra Technologies Corp (ZBRA), Zoetis Inc (ZTS).
