Daily Market Notes: 3-2-2023

The market started the new month of March similar to the way that it ended February, namely not so great as the Dow managed to eke out a nominal gain due to strength in a few members such as CAT with a nice gain, in addition to AMGN, BA and CRM ahead of its earnings report last night which were really strong.

On the other hand, the best that could be said for the S&P is that it held right at its 200-day moving average and bounced a little off of that to finish with a closing decline of 18 down to 3951 as it is steadily giving up further ground lately.

The Nasdaq also continued its recent slide and ended with a 76 point loss as it was negative all day, similar to the S&P, but also managed to close off of its worst levels at 11,379.

The Russell 2000 Index of small stocks eked out a 1 point gain to 1898 while once again the VIX ended lower on a down day in the S&P which is really strange and continues the pattern of its remaining in a very narrow range for the longest time now and the advice to buy calls on this item have turned out to be a real bust so far.

After a hot start to the year, the stock market has struggled as data piled up to show inflation and the overall economy are remaining more resilient than expected. That forced many investors to delay their forecasts for a recession to later in the year, while also raising their expectations for how high the Federal Reserve will take interest rates.

The February ISM Manufacturing Survey did not help either as it ended in contraction mode again at 47.7 and said that a measure of prices paid rose in February and hit its highest level since September.

The widespread expectation is now for the Fed to take the funds rate to at least 5.25% by June. Some bets are also calling for the rate to top 5.50%, its highest level since 2001. The rate is currently in a range of 4.50% to 4.75% after starting last year at basically zero.

Treasury yields rose immediately after the release of the manufacturing data, with the  10-year yield up to 3.99% from 3.93% late Tuesday while the 2-year rose to 4.89% from 4.82%

Several big-name retailers have already offered discouraging forecasts for the upcoming year given the challenges U.S. households are facing because of high inflation and other factors.

KSS fell after it swung to a surprise loss for the three months. ROST edged up 0.1% after spending most of the day lower despite reporting better profit and revenue for the latest quarter than expected but gave a forecast for profit this upcoming year that fell short of expectations. LOW fell one of the largest losses in the S&P after it reported weaker revenue for the latest quarter than expected.

Vaccine company NVAX tumbled by 25% after it warned there’s “substantial doubt” about its ability to stay in business over the next year. It reported a net loss of $657.9 million for the last year.

On the winning side was FSLR  which made a nice gain after it reported stronger results for the latest quarter than expected and continued bookings for the future.

Hong Kong’s Hang Seng index jumped by 4% and stocks in Shanghai gained 1% after reports on manufacturing in China showed a strong recovery after anti-virus controls were lifted late last year. That followed a slump in activity that dragged last year’s economic growth to 3%, China’s second-lowest level since at least the 1970s. As a result, Chinese-listed stocks here did well, such as BABA and BIDU, among others.

The fourth-quarter earnings reporting season is coming to an end with the following lineup: yesterday  –  AMC, A, ANF, DLTR, KSS, NIO, TUP, RIVN, NVAX, MNST, LOW, SPCE lower while FSLR, URBN, WRBY, WEN, HP, ROST ended higher; today  – Dow component CRM plus OKTA, M, KR, SPX higher while SNOW, BBY, BILI, HRL are lower; tonight – BUD, AVGO, ZS, AI, HPE, JWN, VSCO, VME, COST, DELL, MRVL; Friday – HIBB.

Economic reports will have: yesterday –  ISM February Manufacturing Index slipped to 47.7, which was the third straight month of contraction, January construction spending slipped by 0.1%; today – weekly jobless claims slipped by 2K to 190K for the seventh straight week below 200K, unit labor costs for the 4Q rose by 3.2% while 4Q productivity slipped to 1.7%; Friday – ISM February Services Index.

Donald M. Selkin

Chief Market Strategist


Don Selkin is the Chief Market Strategist at Newbridge Securities Corporation, member FINRA/SIPC and provides the Fair Value analysis for CNBC each morning. The commentary provided in this Market Letter is intended to provide our current or potential customers with timely market analysis and should not be considered a research report. This Market Letter may contain, and is limited to: Discussions of broad based indices; Commentaries on economic, political or market conditions; Technical analysis concerning the demand and supply for a sector, index or industry based in trading volume and price; Statistical summaries of multiple companies’ financial data, including listings of current ratings; and, recommendations regarding increasing or decreasing holdings in particular industries or securities. This Market Letter does not make a financial or investment recommendation or otherwise promotes a product or service of the firm. This Market Letter contains only news, facts, and commentary on information previously reported from a news source believed to be accurate and reliable by the author. These news sources include the following: {Bloomberg Financial, Reuters, and Associated Press}. It is possible that at any given point in time, the author, Newbridge Securities, or one or more of its employees or registered individuals associated with Newbridge Securities, may hold a position, either long, or short, as well as options, bonds or other instruments in the companies mentioned in this report.