S&P 500 and Nasdaq In a Holding Pattern Ahead of Inflation Data

Barry Adams
27 Feb, 2024
New York City

Stocks traded in a narrow range for the second day in a row, and benchmark indexes hovered near highs as investors prepared for a barrage of economic releases later this week. 

The S&P 500 index and the Nasdaq Composite edged slightly lower, and Treasury yields edged down as investors digested the release of factory orders and new home sales data. 

Moreover, investors debated the impact of higher-for-longer rates on the housing market and consumer spending, as interest rates are not expected to come down at least for the next three months. 

Investors are also factoring in the possibility of a no-landing scenario, where the Federal Reserve keeps interest rates at elevated levels while inflation eases slowly to 2% over a period of time, or over eighteen months. 

 

Durable Goods Orders Decline in January 

Seasonally adjusted factory orders decreased 6.1% from the previous month in January, the U.S. Census Bureau reported Tuesday. 

The orders declined 0.8% from a year ago, and the monthly decline in orders was the steepest decline since April 2020. 

Excluding large-ticket transportation, orders declined 0.3%, and excluding defense, new orders fell 7.3% from the previous month. 

New orders of non-defense capital goods, excluding volatile aircraft orders, which provides a better insight into capital expenditure by businesses, increased 0.1% from the previous month but fell 0.2% from a year ago. 

 

U.S. indexes and Yields

The S&P 500 index decreased 0.1% to 5,065.43, and the Nasdaq Composite increased 0.1% to 15,995.52. 

The yield on 2-year Treasury notes increased to 4.70%, 10-year Treasury notes inched down to 4.29%, and 30-year Treasury bonds edged down to 4.41%.

WTI crude oil increased $0.78 to $78.36 a barrel, and natural gas prices increased 9 cents to $1.83 a thermal unit.

Gold decreased by $0.18 to $2,030.36 an ounce, and silver fell 2 cents to $22.49. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 103.76.

 

U.S. Stock Movers

AutoZone rose 2% to $2,825.0 after the automotive parts retailer reported better-than-expected revenue and earnings in its fiscal second quarter. 

Revenue in the fiscal second quarter rose to $3.85 billion, and earnings advanced to $28.89 per share. 

Macy's declined 1.9% to $19.0 after the apparel retailer reported slightly lower-than-expected revenue in the fourth quarter and offered a cautious sales outlook in the current quarter. 

The retailer reported revenue in its latest quarter of $8.12 billion and estimated full-year revenue between $22.2 billion and $22.9 billion. 

Lowe's Companies decreased 0.6% to $230.01 after the home improvement retailer reported better-than-expected fourth-quarter results. 

The retailer also estimated full-year revenue in the current fiscal year to decline between $84 billion and $85 billion, from $86.4 billion in the fiscal year 2023. 

Zoom Video Communications rose 9% to $68.80 after the online communication platform reported slightly better-than-expected quarterly revenue. 

 

Consumer Confidence Remains Weak In Germany and France

European markets struggled to extend gains as investors reviewed the latest update on consumer confidence in Germany and France. 

The forward-looking consumer confidence indicator improved slightly in March as consumers battled high prices and weak economic conditions persisted. 

The GfK Consumer Climate Indicator for Germany improved to 29.0 in March from an 11-month low of 2.6 in February, said the survey company GfK Group. 

However, France's consumer confidence declined unexpectedly in February, the statistical agency INSEE reported Tuesday. 

The consumer sentiment index decreased to 89 from 91 in January as more consumers were pessimistic about the outlook for their standard of living and their financial situation. 

Also, more consumers worried about the inflation outlook and losing their jobs and felt now was not the best time to make a major purchase. 

 

Eurozone Overall Private Sector Credit Growth Stalled

Elsewhere in the eurozone, bank lending to households increased by 0.3% to €6.87 trillion, the slowest pace of increase since March 2015, the European Central Bank reported Tuesday. 

Moreover, lending to non-financial corporations increased by 0.2% in January, following an upwardly revised 0.5% rise in December. 

The overall private sector credit growth, including corporations and households, increased by 0.4%, matching the rate in the previous month. 

 

UK Retail Price Inflation Eased 

Separately, the UK's retail trade association said retail price inflation dropped to a near two-year low in February. 

The retail shop price index increased 2.5% from a year ago in February, slower than 2.9% in January, and the lowest since March 2022, the British Retail Consortium reported Tuesday. 

 

Europe Indexes and Yields

The DAX index increased by 0.8% to 17,556.49, the CAC-40 index rose by 0.2% to 7,948.40, and the FTSE 100 index inched lower by 0.01% to 7,683.02.

The yield on 10-year German bonds edged up to 2.41%; French bonds inched higher to 2.89%; the UK gilts edged lower to 4.13%; and Italian bonds inched lower to 3.87%.

The euro edged higher to $1.085, the British pound inched higher to $1.268, and the U.S. dollar gained to 87.99 Swiss cents.

The natural gas price in Europe dropped 8% last week and approached the pre-Ukraine war crisis level of May 2021. 

Brent crude increased $0.75 to $83.28 a barrel, and the Dutch TTF natural gas increased by €0.38 to €24.39 per MWh.

 

Europe Stock Movers

SEB SA declined 6% to €107.0 after Peugeot Invest sold its stake in the consumer appliance maker. 

Abrdn PLC declined 1.8% to 158.65 pence after the company narrowed its full-year losses and announced its plan to cut 500 jobs as part of its cost reduction program. 

Smith & Nephew increased 1.2% to 1,139.50 pence after the company reported improving financial results in the fourth quarter and in full-year 2023. 

Casino Guichard Perrachon soared 29% to €0.68 after a French court approved the company's restructuring plan. 

Bouygues SA advanced 5.9% to €35.98 after the diversified construction conglomerate reported core annual profit ahead of its own target. 

 

Asian Markets Struggle to Hold Near Record Highs

Financial markets in Asia reacted to local news, and inflation in Japan dropped after food prices rose at the slowest pace in more than 15 months. 

Crude oil edged higher in international trading due to rising tensions in the Middle East and a lack of additional tankers to cover longer routes, as merchants have no plans to use Red Sea shipping lanes in the near future. 

Market indexes in Japan and India hovered near record highs but the indexes in Shanghai and Hong Kong resumed their downward slide after initial enthusiasm for the government intervention waned. 

 

Japan's Inflation Drops to a 22-month Low

Stocks in Tokyo edged lower, and the annual inflation rate in Japan edged lower in January. 

The Nikkei 225 Average decreased 0.2% to 39,163.85, and the Topix index gained 0.1% to 2,676.96. 

Retail inflation decreased to 2.2% in January from 2.4% in December, the Ministry of Internal Affairs and Communications reported Tuesday. 

Core inflation, which excludes fresh food but includes energy, fell to 2.0% from 2.3% in December and fell to within the target rate set by the Bank of Japan after staying above for 21 months in a row. 

Tech stocks and large-cap companies were among the leading gainers in Tuesday's trading. 

Tokyo Electron, Screen Holdings, SoftBank Group, Nippon Steel, and Mitsubishi UFJ gained between 0.5% and 4%. 

 

China Stocks Extend Losses, Hong Kong Awaits Annual Budget 

China stocks extended losses to the third day as government intervention faded and investors focused on weak economic fundamentals and the ongoing property market malaise. 

The CSI 300 index increased 0.9% to 3,483.13, and the Hang Seng index edged up 0.6% to 16,645.29. 

Benchmark indexes in Hong Kong extended losses to the third day after advancing 0.7% in the previous two sessions. 

Hong Kong stocks were also under pressure ahead of the release of the city's budget on Wednesday, and investors are looking for incentives for property transactions, tourism, and capital inflow. 

Property developers were among the leading decliners, and Sun Hung Kai, China Resources Land, China Vanke, Longfor Group, and Hang Lung Properties fell between 0.8% and 4%. 

Tech stocks traded sideways, and Baidu, Meituan, Alibaba Group, JD.com, and Tencent declined between 2% and 4%. 

 

Valuation Worries Keep India Indexes Under Pressure 

Stocks in Mumbai struggled to get traction as investors debated the future rate path, economic growth drivers, and earnings results. 

The Sensex and the Nifty indexes traded down but hovered near record highs after indexes extended gains in the previous weeks. 

Both the Sensex and Nifty indexes have advanced for five consecutive weeks, driven by steady fund flows from domestic and international investors. 

However, market participants are increasingly worried about stock valuations ahead of election jitters, and banks have faced selling pressure. 

Moreover, investors have avoided tech service exporters because of uncertainties related to the impact of artificial intelligence on future growth rates, and higher interest rates have dampened the present value of future earnings. 

The Sensex index decreased 66.60 points to 72,723.53, and the Nifty index fell 31.85 points to 22,090.20. 

On the Mumbai stock exchange, 187 stocks traded at their 52-week highs and 11 stocks traded at their 52-week lows.