Stocks took a hit today as bond yields rose and the market braced for the effects of “triple witching,” with the S&P 500, Dow Jones Industrials, and Nasdaq 100 all in the red this morning. Concerns about inflation pushed T-note prices down and yields up, with the 10-year T-note hitting a 2-week high. This was fueled by the unexpected increase in the US Feb import price index ex-petroleum, following disappointing consumer and producer price reports earlier in the week. These factors are raising expectations that the Fed will delay interest rate cuts.
Adding to the downward pressure were some negative corporate announcements. Adobe and Jabil both saw their stocks drop by more than 13% after issuing weak forecasts. Chipmakers also took a hit after reports that the Chinese government is pushing for increased purchases from local auto chipmakers, impacting companies like ON Semiconductors, NXP Semiconductors NV, Nvidia, Texas Instruments, Analog Devices, and Qualcomm.
Today also marks the quarterly expiration of March derivatives tied to stocks, index options, and futures, known as triple witching, which could lead to unexpected swings in stock prices. Around $5.3 trillion of options are set to expire today.
On the economic front, the US Mar Empire manufacturing survey showed a decline in general business conditions, while the US Feb import price index ex-petroleum unexpectedly rose, and US Feb manufacturing production saw a significant increase, the biggest in 10 months.
Looking ahead, the market is discounting the chances of a rate cut at the upcoming March 19-20 FOMC meeting, with a 1% probability, but expectations increase for the following meetings in April and June.
In Europe, government bond yields rose, with the 10-year German bund and UK gilt yields hitting 2-week and 1-1/2 week highs, respectively. This, coupled with higher-than-expected US manufacturing production, contributed to the downward pressure on T-note prices.
Despite the overall market decline, there were some notable gainers. Steel Dynamics, Paccar, Cummins, Valero Energy, Micron Technology, Rivian Automotive, Thor Industries, and Stellantis NV all saw their stocks rise after various positive developments and analyst upgrades. Madrigal Pharmaceuticals also surged after receiving FDA approval for its Rezdiffra drug.
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