Tech Rally Lost Steam After U.S. Treasury Yields Rebounded

Barry Adams
06 Mar, 2023
New York City

Morning's tech rally fizzled after Treasury yields and energy prices rebounded and the familiar worries of hard or soft landing reemerged. 

Market nervousness persisted ahead of the two-day congressional testimony of the Federal Reserve chairman Jerome Powell starting Tuesday. 

Investors are divided in two camps, one favoring the interest rate to pause as early as this summer and the second hoping that the Fed will moderate future rate hikes. 

Despite the eight interest rate increase over the last twelve months, the inflation is not cooling fast enough and significantly higher than the Fed's preferred level of 2%. 

Stocks advanced in morning trading ahead of the release of economic data on employment and comments from the Federal Reserve but the rebound in the Treasury yields cooled the market sentiment and rate worries dominated. 

Economic reports on the U.S. labor market and jobless rate survey are expected to impact market sentiment later in the week. 

Federal Reserve Chairman Jerome Powell is scheduled to offer his views to congressional lawmakers and investors on Tuesday and Wednesday. 

The U.S. Labor Department is scheduled to release the February jobs report on Friday and economists polled by Ticker.com are estimating net payroll additions between 265,000 and 295,000. 

January's payrolls increase by 517,000 is viewed by most economists as an anomaly, despite the tight labor market conditions. 

The U.S. labor market is expected to add less than 260,000 jobs a month, slower than 401,000 in 2022 and 600,000 in 2021.     

Investors are looking ahead to the release of the Euro Area GDP data and comments from the European Central Bank policymakers. 

Crude oil traded with a downward bias after China forecasted a modest increase in economic growth in 2023.  

 

New Orders for Factory Goods Declined In January 

New orders for manufactured goods in January fell $8.9 billion or 1.6% to $542.8 billion, following the downwardly revised 1.7% rise, the U.S. Census Bureau reported Monday. 

New orders declined in two of the last three months but shipments declined for the third month in a row in January by 0.7% following the fall by 0.6%.  

 

China Sets Modest Economic Growth Target In 2023 

China lowered its economic growth target in 2023 to 5% after missing the 5.5% in the previous year. 

China's economy expanded at 3.3% in 2022 and is likely to advance at a slower pace on the weak export growth and falling property prices.  

Outgoing Premier Li Keqiang announced the target rate at the annual legislative conference on Sunday and the party officials focused on reviving growth through other measures.

 

Indexes & Yields 

The S&P 500 index increased 0.7% to 4,072.31 and the Nasdaq Composite index added 1.0% to 11,805.63. 

The yield on 2-year Treasury notes edged lower to 4.89%, 10-year Treasury notes to 3.98% and 30-year Treasury bonds eased to 3.91%. 

Crude oil advanced for the fifth session in a row and increased 94 cents to $80.62 a barrel and natural gas eased 40 cents to $2.60 a thermal unit. 

Natural gas futures plunged 14% following the milder weather forecast for the next two weeks. 

The price of the energy product fell from the five-week high of $3 a thermal unit last week after LNG shipments resumed from the Freeport, Louisiana terminal following a shutdown since June 2022 after a fire broke out.  

 

Altria Agreed to Acquire e-Cigarettes Maker NJOY 

Altria Group Inc increased 1.1% to $47.04 after the maker of Marlboro cigarettes agreed to acquire e-cigarette company NJOY for $2.785 billion. 

Altria recently sold its stake in the troubled e-cigarettes maker Juul Labs, which was once valued at $13 billion in 2018 and the company's products are still facing several investigations from the Food & Drugs Administration. 

The U.S. FDA has approved six of the NJOY's vaping products for sale.  

 

Stock Movers 

Snap Inc gained 13% to $12.03 as the U.S. lawmakers make progress in advancing a bill to provide an authority to President Joe Biden in banning TikTok, the company's main competitor. 

Credit Suisse declined 0.7% to $3.01 after the company's main shareholder Harris Associates sold its entire stake in the company. 

The news was first reported by the Financial Times and independently verified by Ticker.com. 

Chicago-based Harris Associates reportedly owned as much as 10% last year but sold its entire stake in the last two months. 

"There is a question about the future of the franchise. There have been large outflows from wealth management," deputy chair and chief investment officer David Hero said to Financial Times. 

Ciena Corporation rose 4% to $51.14 after the networking equipment maker reported revenue in the last quarter increased 25.1% to $1.06 billion from $844.44 million a year ago. 

Net income increased to $76.24 million or $0.51 per share from $45.82 million or $0.29 per share in the prior-year quarter.

 

European Markets Hover Near 1-year New Highs, CAC-40 Closed at Record High

European market indexes advanced and investors looked ahead to a busy week of economic reports and a fresh batch of corporate earnings. 

Energy explorers and resource stocks closed lower following the weakness in crude oil and natural gas prices after China lowered its economic growth target in 2023. 

European indexes are expected to trade volatile as investors look ahead to India's money supply growth, foreign exchange reserves and industrial production data, U.S. jobs market and the Euro Area GDP data later in the week.

Investors will also review comments from the U.S. Federal Reserve and the European Central Bank policy makers during the week. 

 

Euro Area Retail Sales Eased 

On the economic front, the Euro Area retail sales rose less than expected in January, Eurostat reported on Monday. 

Retail sales in January rose 0.3% after falling 1.7% in December on a monthly basis. 

On an annual basis, retail sales decline eased to 2.3% at the start of the year after falling 2.8% in December. 

The weaker-than-expected retail sales suggested that consumers are still struggling under the high prices of food and energy. 

Food, drinks and tobacco sales rose 1.8% after a 2.1% decline and non-food product sales rose 0.8% after falling 2.5%. 

Automotive fuel sales fell 1.5% reversing a 0.5% increase in the prior month.

UK new car registration increased for the seventh month in a row on the sustained demand for electric vehicles, the Society of Motor Manufacturers and Traders reported Monday. 

Passenger vehicle sales increased 26.2% in February from 14.7% rise in January and new car registration increased to 74,441 units from 58,994 a year ago. 

The 7-month sustained rebound in vehicle sales lifted automobile registration and approached the pre-pandemic 2020 registration in the corresponding month.  

Vehicle registrations were only 6.5% lower than February 2020.

 

China Sets Modest Economic Growth Target In 2023 

China lowered its economic growth target in 2023 to 5% after missing the 5.5% in the previous year. 

China's economy expanded at 3.3% in 2022 and is likely to advance at a slower pace on the weak export growth and falling property prices.  

Outgoing Premier Li Keqiang announced the target rate at the annual legislative conference on Sunday and the party officials focused on reviving growth through other measures. 

 

Indexes & Yields 

The DAX index increased 0.2% to 15,615.14, the CAC-40 index added 0.1% to 7,358.28 and the FTSE 100 index decreased 0.6% to 7,901.03. 

The yield on the 10-year German Bunds edged lower to 2.66%, French bonds eased to 3.2%, the UK gilts to 3.8% and Italian bonds to 4.4%. 

The euro inched higher to $1.06, the British pound edged higher to $1.20 and the Swiss franc to 93.48 U.S. cents. 

Brent crude oil decreased $1.05 to $84.77 a barrel and the Dutch TTF natural gas futures dropped Є2.14 to Є42.85 per MWh. 

 

Europe Movers 

Telecom Italia SpA increased 3% to €0.32 after Italian state investor CDP and Australia's private equity and asset management group Macquarie submitted a joint bid to acquire the company's fixed-network business. 

Eni SpA added 0.7% to €13.52 after the Italian company struck a deal with Abu Dhabi National Oil Company in deepening their ties in reducing emissions and producing clean energy. 

Clarkson PLC increased 5.5% to 3,485.0 pence after the U.K.-based shipping services provider reported a rise in 2022 earnings. 

Resource stocks traded lower after Brent crude declined 1.1% and natural gas dropped 4.8% and base metal prices fell around 1%.  

Glencore, Antofagasta and Anglo American declined between 1% and 3%. 

James Fisher & Sons plc declined 4.6% to  372.50 pence after the U.K.-based company agreed to sell its nuclear decommissioning business for nominal consideration and established a new intercompany credit agreement. 

 

Tech Surge Leads Nikkei Higher In Japan 

The Nikkei 225 index increased 1.1% to 28,237.78 after tech stocks rallied following the gains in the U.S. tech stocks after Treasury yields closed lower In Friday's trading. 

SoftBank Group led the gainers with a rise of 3.1%, Tokyo Electron jumped 2.7%, Lasertec gained 1.8%, Renesas Electronics  advanced 2.7% and Keyence increased 1.9%.

The yield on 10-year Japanese government bonds held firm at 0.5% ahead of the last Bank of Japan's meeting on Friday under the leadership of Haruhiko Kuroda. 

 

Stocks Turn Lower In China On Falling Stimulus Expectations   

The Shanghai Composite Index fell 0.2% and the Hang Seng index added 0.2% to 20,603.19 after China projected a modest economic growth in 2023. 

Tech stocks declined sharply in Hong Kong's trading after the modest economic growth projection dashed hopes of additional government stimulus.  

Country Garden Services dropped as much as 10% but recovered to a loss of 2.7% to HK$15.60 after the company issued a profit warning. 

 

Optimism Lifted India Stocks 

Stocks in Mumbai closed at 2-week highs after the service sector expanded at the fastest pace in 12 years.  

The Sensex index increased 0.7% or 415.49 and the Nifty index added 0.7% or 117.10 points to 17,711.45.

Of the stocks traded on the Bombay Stock Exchange 102 stocks closed at new 52-week highs and 170 closed at new 52-week lows.

The yield on 10-year Indian government bonds hovered near 7.42% and the Indian rupee edged higher to ₹81.88 against the U.S. dollar. 

Adani Group stocks rebounded after a vote of confidence from the investment managers at the Life insurance Corporation and other U.S. investment groups.