Stocks Turned Lower As Treasury Yields Extended Gains

Barry Adams
01 Mar, 2023
New York City

U.S. stocks lacked direction in trading and Treasury yields hovered near 3-month highs. 

Stocks got an early boost after China's official data on the manufacturing sector was much stronger-than-anticipated. 

Bond yields advanced and the yields on 1-year Treasury notes and six-month Treasury notes pulled further above 5% level.  

Recent reports on the economy, inflation and employment are signaling that inflation is not likely to cool as fast as previously expected, which continues to put upward pressure on rates. 

 

China's Manufacturing Expanded at 11-year High Rate 

China's PMI in February rose to 52.6 from 50.1 in January, the high not seen since April 2012, the National Bureau of Statistics reported Thursday. 

Manufacturing sector expanded for the second month in a row after Beijing ended its three-year old zero-Covid policy.  

China's service sector accelerated its expansion, according to the data released by the NBS. 

Non-manufacturing PMI rose to 56.3 in February from 54.4 in the previous month after new orders expanded at a faster pace.  

 

Higher Mortgage Rates Crimp Applications to 28-year Low 

Mortgage applications declined 5.7% from the previous week, according to data released by the Mortgage Bankers Associations for the week ending February 24. 

The index measuring application volume dropped near the 28-year low after the 30-year fixed-rate mortgage increased to 6.71% last week. 

"There has now been three straight weeks of declines in applications as mortgage rates have jumped 50 basis points over the past month,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.

"Purchase applications were 44% lower than a year ago and refinance applications accounted for less than a third of all applications and remained more than 70 percent behind last year’s pace, as a majority of homeowners are already locked into lower rates,” added Kan.   

 

Indexes & Yields 

The S&P 500 index decreased 0.2% to 3,964.36  and the Nasdaq Composite index fell 0.2% to 11,438.60.

The yield on 2-year Treasury notes inched higher to 4.85%, 10-year Treasury notes rose to 3.95% and 30-year Treasury bonds held steady at 3.94%. 

Crude oil increased 13 cents to $77.81 a barrel and natural gas fell 4 cents to $2.40 a thermal unit. 

 

U.S. Movers

Lowe's Companies said revenue in the fourth quarter rose to $22.4 billion from $21.3 billion and net income declined to $957 million from $1.2 billion and diluted earnings per share fell to $1.58 from $1.78 in the previous year. 

Comparable sales in the quarter declined 1.5%. 

In full-year  2022, revenue rose to $97 billion from $96.3 billion and net income fell to $6.4 billion from $8.4 billion and diluted earnings per share decreased to $10.17 from $12.04 a year ago.

During the quarter, the retailer repurchased approximately 10 million shares for $2.0 billion and it repurchased 71 million shares for $14.1 billion for the year. 

The company also paid $643 million in dividends in the fourth quarter and $2.4 billion in dividends for the year. 

In  total, the company returned $16.5 billion to shareholders through share repurchases and dividends in 2022.

Kohl's Corporation said revenue in the fourth quarter decreased 7.2% to $5.8 billion and the retailer swung to a net loss of $273 million from $299 million and diluted earnings per share was ($.2.49) compared to $2.20 a year ago. 

Comparable sales in the quarter fell 6.6%. 

In full-year 2022, revenue fell 7.1% to $17.2 billion and the apparel retailer swung to a net loss of $19 million compared to a profit of $938 million and diluted earnings per share was ($0.15) compared to $6.32 a year ago. 

Comparable sales in the year declined 6.6%.  The retailer announced a dividend of 50 cents per share payable March 29 to shareholders of record on March 15.