Stocks Pressured by Higher Bond Yields and a Slide in Chip Stocks

The S&P 500 Index ($SPX) (SPY) today is down -0.36%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.16%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.57%.

US stocks today are moving lower, with the Nasdaq 100 falling to a 1-1/2 week low.  Higher T-note yields today are weighing on stocks.  Also, weakness in chip stocks is undercutting the overall market.  In addition, some negative corporate news is undercutting equities.  Paramount Global is down more than -5% after Bronfman Jr. dropped out of a bidding war for the company.  Also, Cava Group is down more than -7% after the company’s largest shareholder, Artal International S.C.A., filed to sell 6 million shares.  In addition, American Woodmark is down more than -11% after reporting weaker-than-expected Q1 net sales.

June SP CoreLogic US composite-20 home price index growth eased to a 6-month low of +6.47% y/y from +6.88% y/y in May but was stronger than expectations of +6.14% y/y.

The markets are awaiting Wednesday’s earnings results from Nvidia and Friday’s US July core PCE deflator, the Fed’s preferred inflation gauge.

The markets are discounting the chances at 100% for a -25 bp rate cut for the September 17-18 FOMC meeting and at 27% for a -50 bp rate cut at that meeting.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is up +0.13%.  China's Shanghai Composite closed down -0.24%.  Japan's Nikkei Stock 225 closed up +0.47%.

Interest Rates

September 10-year T-notes (ZNU24) today are down -9 ticks.  The 10-year T-note yield is up +4.4 bp at 3.860%.  T-note prices today are moderately lower. Higher European government bond yields today are weighing on T-note prices today.  Also, an increase in inflation expectations is negative for T-notes after the US 10-year breakeven inflation rate today rose to a 3-week high of 2.153%.  In addition, supply pressures are undercutting T-notes as the Treasury will auction $183 billion T-notes this week, beginning with today’s $69 billion auction of 2-year T-notes.   

European government bond yields today are moving higher.  The 10-year German bund yield climbed to a 3-1/2 week high of 2.300% and is up +5.2 bp at 2.299%.  The 10-year UK gilt rose to a 3-1/2 week high of 4.020% and is up +10.4 bp at 4.016%.

The German Sep GfK consumer confidence index unexpectedly fell -3.4 points to a 4-month low of -22.0, weaker than expectations of an increase to -18.2.

ECB Governing Council member Centeno said the direction of monetary policy in the Eurozone seems "relatively clear" given indicators such as lower inflation.

ECB Governing Council member Knot said he favors gradual monetary easing so long as inflation stays on track to return to the ECB's 2% goal next year.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 97% for the September 12 meeting.

US Stock Movers

Super Micro Computer (SMCI) is down more than -7% to lead losers in the S&P 500 and Nasdaq 100 after Hindenburg Research said it has a short position in the stock. 

Chip stock weakness is weighing on the overall market.  Marvell Technology (MRVL), Lam Research (LRCX), and Applied Materials (PARA) are down more than -2%.  Also, Nvidia (PARA), ARM Holdings Plc (PARA), Micron Technology (MU), ON Semiconductors (ON), KLA Corp (KLAC), Broadcom (AVGO), and Microchip Technology (MCHP) are down more than -1%. 

Paramount Global (PARA) is down more than -5% after Bronfman Jr. dropped out of a bidding war for the company. 

Cava Group (CAVA) is down more than -7% after the company’s largest shareholder, Artal International S.C.A., filed to sell 6 million shares.

American Woodmark (AMWD) is down more than -11% after reporting Q1 net sales of $459.1 million, weaker than the consensus of $479.6 million. 

Hershey (HSY) is down more than -1% after Citigroup downgraded the stock to sell from neutral with a price target of $182. 

Cinemark Holdings (CNK) is down more than -1% after B Riley Securities downgraded the stock to neutral from buy.  

Eli Lilly (LLY) is up more than +1% after it announced that it is selling vials of its weight-loss drug Zepbound at a 50% discount to its auto-injector pens.

Insulet (PODD) is up more than +2% after the company received FDA clearance for its Omnipod 5 to treat people with Type 2 diabetes ages 18 years and older.

Cleveland-Cliffs (CLF) is up more than +1% after Seaport Global Securities upgraded the stock to buy from neutral with a price target of $16.50. 

Energizer Holdings (ENR) is up more than +5% after Truist Securities upgraded the stock to buy from hold with a price target of $40.

JD.com (JD) is up more than +2% after the company announced a $5 billion stock repurchase program. 

Trip.com (TCOM) is up more than +7% after reporting Q2 adjusted earnings per American depositary receipts of 7.25 yuan, well above the consensus of 5.22 yuan.

Earnings Reports (8/27/2024)

Ambarella Inc (AMBA), American Woodmark Corp (AMWD), Box Inc (BOX), Citi Trends Inc (CTRN), Hain Celestial Group Inc/The (HAIN), nCino Inc (NCNO), Nordstrom Inc (JWN), Ooma Inc (OOMA), PVH Corp (PVH), REX American Resources Corp (REX), ScanSource Inc (SCSC), Semtech Corp (SMTC), SentinelOne Inc (S), Waldencast plc (WALD).

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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.