Tech Stocks Drive S&P 500 Higher Despite Mixed Economic Signals

The S&P 500 Index ($SPX) (SPY) today increased by +0.19%, while the Dow Jones Industrials Index ($DOWI) (DIA) rose by +0.05%. Meanwhile, the Nasdaq 100 Index ($IUXX) (QQQ) saw a gain of +0.36%. March E-mini S&P futures (ESH25) were up by +0.23%, and March E-mini Nasdaq futures (NQH25) climbed by +0.33%.

Technology Stocks Shine Amid Mixed Earnings Reports

Today’s stock market is on the rise, primarily fueled by advancements in technology stocks. Expedia Group’s shares surged over +16% following a strong Q4 earnings report that exceeded expectations. Similarly, Take-Two Interactive Software experienced a jump of more than +14% after announcing a robust full-year adjusted Ebitda forecast and confirming the anticipated launch of Grand Theft Auto VI in the fall of 2025.

Challenges for Major Players

Conversely, Amazon.com shares dropped over -2% as the company provided a weaker-than-expected outlook. In addition, Microchip Technology also saw a decline of more than -2% after projecting Q4 net sales below market expectations.

Bond Yields Climb Following Job Market Data

Today’s rise in bond yields further dampens stock market enthusiasm. The increase followed an unexpected drop in the US January unemployment rate, which fell to an 8-month low. Furthermore, average hourly earnings rose more than anticipated, indicating a labor market that may influence Federal Reserve policies.

When analyzing US labor data, January nonfarm payrolls saw an increase of +143,000, lower than the anticipated +175,000. However, December figures were adjusted upward to +307,000 from +256,000. The January unemployment rate unexpectedly dropped by -0.1%, reaching 4.0%, outperforming expectations that it would remain unchanged at 4.1%.

Average hourly earnings rose by +0.5% month-over-month and +4.1% year-over-year, exceeding the predicted +0.3% and +3.8%, respectively.

Comments from Dallas Fed President Logan were sobering for stocks and bonds when she mentioned that interest rates might be nearing a neutral level, potentially reducing the likelihood of further rate cuts even if inflation remains subdued.

Current Earnings Season and Market Expectations

With earnings season in full swing, companies are reporting Q4 results. Amazon.com is set to announce its quarterly results post Thursday’s market close. Analysts from Bloomberg Intelligence estimate that S&P 500 earnings increased by +7.5% year-over-year in Q4, marking the second-highest pre-season forecast over the last three years.

The market odds for a -25 basis point rate cut at the upcoming FOMC meeting on March 18-19 stand at about 10%.

Global Market Overview

Looking overseas, stock markets exhibited mixed signals. The Euro Stoxx 50 dipped -0.15%, while China’s Shanghai Composite Index reached a 5-week high, closing up +1.01%. Japan’s Nikkei Stock 225, however, ended lower by -0.72%.

Interest Rates Update

March 10-year T-notes (ZNH25) are down -14 ticks today, with the yield rising +5.0 basis points to 4.485%. After experiencing volatility, T-notes peaked at a 1.5-month high before retreating. Initially, yields rose on weaker-than-expected nonfarm payroll results, but dropped after the favorable unemployment rate and wage data indicated potential hawkish shifts in Fed policy.

In Europe, government bond yields are also on the rise, with the 10-year German bund yield increasing by +1.2 basis points to 2.391%, and UK’s 10-year gilt yield climbing by +0.5 basis points to 4.489%.

European Manufacturing Data

German industrial production for December fell by -2.4% month-over-month, considerably worse than the -0.7% forecast and marking its largest decline in five months. However, trade data demonstrated resilience, with exports rising +2.9% unexpectedly and imports increasing +2.1%, both significantly outperforming market expectations.

Swaps indicate a near certainty for a -25 basis point rate cut by the European Central Bank at their meeting on March 6.

Notable Stock Movements in the US

Within the S&P 500, Expedia Group (EXPE) saw a notable rise of over +16%, leading the index after reporting Q4 revenue of $3.18 billion, surpassing the expected $3.07 billion. Take-Two Interactive Software (TTWO) gained more than +14% after forecasting full-year adjusted Ebitda between $723 million and $777 million, exceeding the consensus of $748.3 million.

Monolithic Power Systems (MPWR) increased more than +5%, reporting Q4 revenue of $621.7 million and predicting Q1 revenue between $610.0 million and $630.0 million, well above estimates of $582.8 million. Freeport-McMoRan (FCX) also advanced over +5%, fueled by a rise in copper prices, which hit a four-month high.

Meanwhile, Affirm Holdings (AFRM) rose over +21% after exceeding Q2 revenue expectations with $866 million, alongside an optimistic forecast for the year. Other gainers include Cloudflare (NET) which saw a +13% increase and Fortinet (FTNT) with over a +1% rise.

On the downside, Amazon.com (AMZN) dipped more than -2%, forecasting weaker Q1 net sales. FMC Corp (FMC) fell over -4% after being downgraded by UBS. Nike (NKE) and Air Products & Chemicals (APD) also faced declines of more than -2% and -3%, respectively, on price target cuts from Deutsche Bank and JPMorgan Chase.

Microchip Technology (MCHP) led losses in the Nasdaq 100 with a drop of more than -3% after issuing lower revenue forecasts. Elf Beauty (ELF) suffered a dramatic drop of more than -25% after missing earnings expectations and cutting its annual forecast significantly, while BILL Holdings (BILL) plummeted by over -34% following disappointing revenue guidance.

Upcoming Earnings Reports

Look out for earnings reports from Cboe Global Markets Inc (CBOE), FirstEnergy Corp (FE), Fortive Corp (FTV), and Kimco Realty Corp (KIM) on February 7, 2025.

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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