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The stock market didn't start well on Friday nor did it end well. Rising Treasury yields after the stronger-than-expected December employment report drew most of the blame along with the stronger dollar, which poses an earnings headwind for multinational companies.
The 10-yr note yield climbed as high as 4.80% following Friday's close and has pulled back to 4.77% this morning, down one basis point from Friday's settlement. The U.S. Dollar Index for its part is up another 0.2% to 109.83, hitting its highest level in more than two years.
Oil futures continue to rise, too, adding to the inflation angst that has been a driver of Treasury yields. WTI crude futures are up 1.9% to $78.03/bbl and Brent crude futures are up 1.5% to $80.92/bbl. There will be some key inflation reports this week. The January Producer Price Index (PPI) is out Tuesday and will be followed by the January Consumer Price Index (CPI) on Wednesday.
Market participants seem uncomfortable with all of it, including the price action of late that hasn't gotten any better this morning.
The S&P 500 futures are down 36 points and are trading 0.7% below fair value, the Nasdaq 100 futures are down 199 points and are trading 1.0% below fair value, and the Dow Jones Industrial Average futures are down 24 points and are trading 0.1% below fair value.
This weakness is a by-product of a risk-off dynamic that is weighing on the broader market. That includes the mega-cap stocks, which are on the softer side this morning. NVIDIA (NVDA), down 3.3%, and Tesla (TSLA), down 3.0%, are the biggest losers in that influential space.
Moderna (MRNA) will be counted among the biggest losers in general. It is down 19% after slashing its FY25 revenue revenue guidance. lululemon athletica (LULU), on the other hand, raised its Q4 guidance following strong holiday sales and a better gross margin performance. LULU is up 3.0%.
Intra-Cellular Therapies (ITCI) is up 35%, garnering a $14.6 billion, or $132.00 per share, cash offer from Johnson & Johnson (JNJ); meanwhile, Howard Hughes Holdings (HHH) is up 9.5% on the back of a merger proposal by Bill Ackman's Pershing Square Capital that allows the company's stockholders to benefit from a cash/stock election that would enable them to elect to receive merger consideration in cash at $85 per share, or to ‘rollover' all or a portion of their shares into the post-merger company.
Still, any M&A buzz, or any good news really, is being overshadowed by the testy action in the Treasury market that has gotten in the way of multiple expansion.
This will be an important week in at least two regards: (1) the PPI and CPI reports will either soothe or exacerbate the market's inflation concerns and (2) the big banks reporting earnings this week (starting Wednesday) will either soothe or potentially exacerbate macro concerns tied to the rising rates.
On a related note, JPMorgan Chase (JPM) CEO Jamie Dimon told CBS News over the weekend that he is "cautiously pessimistic" about the U.S. economy.
There is potential that the market could become more cautiously pessimistic about the government's budget deficit when the December Treasury Budget is released today at 2:00 p.m. ET. That remains to be seen, but it is evident now that the stock market isn't liking what it is seeing in the Treasury market.
