Daily Markets: Treasury Yields Resume Their Climb on Stimulus Fueled Rally

Today’s Big Picture Equity indices in Asia finished the day’s trading mostly higher leading to

Today’s Big Picture

Equity indices in Asia finished the day’s trading mostly higher leading to similar performance for the week in full. Notable decliners include Hong Kong’s Hang Seng, which finished down 1.2% for the week in full, and China’s Shanghai Composite with its 1.4% move lower for the week. By mid-day trading, European equity indices were mostly lower and US futures point to a mixed open when those markets open later this morning. Pressuring equities is the resumption of the upward move in the 10-year U.S. Treasury yield which hit 1.6% earlier this morning following the signing of President Biden’s stimulus package into law. According to the White House, direct deposit stimulus checks will start hitting American bank accounts as soon as this weekend. 

Before US equity markets open, the February Producer Price Index will be reported, and should data contained in that report come in hotter than expected odds are it would lead Treasury yields higher, pressuring equities, particularly growth and technology ones, as we close out the trading week.

Data Download

Coronavirus

During his first televised primetime address to the nation yesterday, President Biden announced that every US adult would be eligible to be vaccinated against the coronavirus by May 1 and set Independence Day as a goal for a return to some level of normalcy – if anyone can even remember what that is like.

At this point at least one in four American adults have received at least one coronavirus shot as the US nears 100 million total doses delivered. More than 64 million people in the US have been given at least one shot and 33.7 million over 65 years of age have been given at least one-shot accounting for 62.4% of America’s seniors.

International Economy

China’s market regulator fined 12 companies, including Baidu Inc (BIDU)Tencent Holdings (700:HK), and Didi Chuxing, related to 10 deals that violated anti-monopoly rules.

Germany’s Inflation rate rose 1.3% YoY in February matching the consensus forecast. 

Construction Output in the UK in January fell 5% YoY after falling 3.9% in December 2020, from which it was expected to decline to -4.8%. Industrial Production dropped 4.9% YoY in January following the 3.3% YoY decline the previous month but fared better than the expected 4.0% decline. Manufacturing Production dropped 5.2% YoY after falling 2.5% previously and the expected 3.6% YoY decline.

Industrial Production in the Eurozone rose 0.1% YoY in January, ending 26 months of contraction, coming in well above the expected 2.4% YoY decline.

Domestic Economy

After rising slightly last week, initial jobless claims were again lower this week at 712k, which was 13k below expectations. The current reading is just 1k above the lowed post-pandemic low of 711k from the first week of November but remains 17k higher than the all-time pre-pandemic high of 695k. Continuing claims also came in below expectations at 4.14 million versus 4.2 million expected. This was a new post-pandemic low.

Yesterday’s Flow of Funds from the Federal Reserve revealed that total debt is growing at the fastest pace since the fourth quarter of 2004 with corporate debt sitting at more than half of GDP. While that sounds bad, at the moment corporate interest payments are only about 4.2% of corporate debt so that while the level is high, the service costs are low… at least for now. The report also revealed that investments in the stock market are up to 16.8% of total household assets, the highest level since the 1960s. Home equity levels are incredible, with household mortgage debt sitting at only about one-third of the home’s current value, the lowest level since the early 1990s.

Later today we will get the February Producer Price Index, Michigan Consumer Sentiment, and the usual weekly Baker Hughes oil rig report.

Markets

As President Biden signed into law the $1.9 trillion stimulus bill, growth stocks took the lead with markets rising for the third consecutive day. The Dow, the S&P 500, and the Russell 2000 all hit new record highs, gaining 0.6%, 1.0%, and 2.3% respectively. The Nasdaq Composite added 2.5% but remains 4.9% below its February 12 high. Tech was the strongest S&P 500 sector rising 2.2% as buy-the-dip continues to reward with Communication Services, Consumer Discretionary, and Real Estate all adding more than 1.5%. The VIX dropped below 22 for the first time in the past two weeks.

The US 10-year bond yield remained fairly flat at about 1.53% yesterday while the Treasury curve steepened as the 30-year yield rose 5 basis points to 2.29%, nearing its recent high of 2.32%. With the European Central Bank announcing that it will step up its activity under its existing $2.2 trillion pandemic emergency purchase program, the German Bund 10-year yield fell 0.05 percentage points to -0.036%.

Stocks to Watch

Buckle (BKE) reported January quarter revenue and EPS that topped consensus expectations led by the 18% YoY increase in comparable store net sales. Online sales increased 81.5% YoY to $66.2 million up from $36.4 million in the year-ago quarter. 

Ulta Beauty (ULTA) reported January quarter EPS of $3.41, well ahead of the $2.37 consensus as revenue for the quarter fell 4.6% YoY to $2.2 billion, besting the $2.08 billion consensus. Comparable sales (which for Ulta are from stores open at least 14 months, including stores temporarily closed due to COVID-19, and e-commerce sales) fell 4.8% YoY. Ulta guided its revenue for the coming year to $7.2-$7.3 billion vs. the $7.3 billion consensus and shared expectations to open approximately 40 net new stores and execute approximately 21 remodel or relocation projects. 

Burberry Group (BURBY) announced it expects revenue and adjusted operating profit to be ahead of consensus forecasts as it continues to see a strong rebound. The company’s comparable-store retail sales for its final quarter of 2020 to be in the range of +28%- +32%. For 2021 Burberry sees group revenue down 10%-11% with an adjusted operating margin to be in the range of 15.5%-16.5%.

Poshmark (POSH) reported December quarter EPS that crushed the consensus forecast as revenue for the quarter rose 36.7% YoY to $69.3 million roughly in line with the $69.15 million consensus. The company, however, issued downside revenue guidance of $75.5-$77.5 million for the current quarter vs. the $80.1 million consensus.

While GoodRx (GDRX) reported December quarter results that topped consensus expectations, it guided current-quarter revenue below Wall Street expectations. During the December quarter, Prescription Transactions Revenue grew 26% YoY to $131.3 million, driven by a 32% YoY increase in monthly active consumers 5.6 million. For the current quarter, GoodRx sees revenue of $158-$161 million vs. the $162.4 million consensus. The company also guided its 2021 revenue in the range of $735-$755 million vs. the $737.3 million consensus.

January quarter results at DocuSign (DOCU) topped consensus expectations and the company guided the current quarter above consensus forecasts. Billings for the January quarter rose 46% YoY to $534.9 million leading the company to guide current-quarter revenue to $432-436 million vs. the $418.7 million consensus with expected subscription revenue in the range of $415-419 million. 

Reports purport Samsung Electronics (SSNLF) is experiencing a shortage of Qualcomm’s (QCOM) application processors. Meanwhile, the Biden administration informed some suppliers to China’s Huawei Technologies of tighter conditions on previously approved export licenses, prohibiting items for use in or with 5G devices.

Honda Motor (HMC) plans to sell two all-electric SUVs in the U.S. for the 2024 model year, and it soon will offer hybrid gas-electric versions of its top-selling models.

French automotive company Renault (RNO:FP) sold its entire stake in German auto company Daimler AG (DDAIF)for a total of 1.4 billion euros. 

Following the success of invite-only audio-based social media Clubhouse, Twitter (TWTR) aims to have its live audio feature, Spaces, available to all its users by April.

After today’s market close, there are no companies expected to report their quarterly results. Investors looking to get a jump of those reports to be had in the coming days should visit Nasdaq’s earnings calendar page

On the Horizon

  • March 15: NY Empire State Manufacturing, Net Capital Flows
  • March 16: Retail Sales, Export/Import Prices, Industrial Production, NAHB Housing Market, Business Inventories, API Crude Oil Stocks
  • March 17: Building Permits, Housing Starts, EIA Energy Stocks
  • March 18: Philadelphia Fed Manufacturing, Weekly Jobless Claims
  • March 22: Chicago Fed National Activity Index
  • March 23: New Home Sales, API Crude Oil Stocks
  • March 24: Durable Goods Orders, Markit Manufacturing and Services PMI, EIA Energy Stocks
  • March 25: US Corporate Profits Q4, weekly jobless claims, 
  • March 26: Personal Income & Spending, PCE Price Index, Goods Trade Balance, Wholesale Inventories, Michigan Consumer Sentiment
  • March 29: Dallas Fed Manufacturing
  • March 30: S&P/Case-Shiller Home Price report, Conference Board Consumer Confidence, API Crude Oil Stocks
  • April 1: Alien Nation IPOs on Nasdaq through a Mars Rover SPAC sponsored by the Wormhole Venture Fund led by Jean Luc Picard from Hawkins, Indiana, Weekly jobless claims, Markit Manufacturing PMI, Construction Spending, ISM Manufacturing PMI, Total Vehicle Sales
  • April 2: Nonfarm Payrolls
  • April 5: Markit Services PMI, ISM Non-Manufacturing PMI, Factory Orders
  • April 6: JOLTS Job Openings, IBD/TIPP Economic Optimism, API Crude Oil Stocks
  • April 7: Balance of Trade, EIA Energy Stocks, FOMC Minutes
  • April 8: Weekly jobless claims
  • April 9: PPI, Wholesale Inventories

Thought for the Day

“Just because you fail once, doesn’t mean you’re gonna fail at everything. Keep trying, hold on, and always, always, always believe in yourself, because if you don’t then who will?” ~ Marilyn Monroe

Disclosures

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.