Stocks Slide as Strong Data Pushes Bond Yields Higher

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Thursday closed down -1.13%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.56%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.71%.

Stocks on Thursday posted moderate losses, with the S&P 500 falling to a 1-week low, the Dow Jones Industrials dropping to a 2-month low, and the Nasdaq 100 sliding to a 1-3/4 month low.  Higher T-note yields Thursday weighed on technology stocks and the overall market.  Also, Adobe plunged by more than -16% to lead tech stocks lower after forecasting weaker than expected Q4 revenue and agreeing to buy Figma for about $20 billion.

Stronger-than-expected U.S. economic news Thursday on weekly jobless claims, Aug retail sales, and Aug manufacturing production pushed the 10-year T-note yield up +4.9 bp to 3.453%.  In addition, a more than -3% fall in crude oil prices Thursday undercut energy stocks.

Stocks saw some early support Thursday after overnight news that railroad companies and unions representing more than 100,000 workers reached a tentative labor agreement.  That will avert a nationwide rail strike on Friday that could have been very damaging to the U.S. economy.

U.S. weekly initial unemployment claims unexpectedly fell -5,000 to a 3-1/2 month low of 213,000, showing a stronger labor market than expectations of an increase to 227,000.

U.S. Aug retail sales unexpectedly rose +0.3% m/m, stronger than expectations of a -0.1% m/m decline.  However, Aug retail sales ex-autos unexpectedly fell -0.3% m/m, weaker than expectations of unchanged.

The U.S. Sep Philadelphia Fed business outlook survey fell -16.1 to -9.9, weaker than expectations of 2.3.

The U.S. Sep Empire manufacturing survey general business conditions index rose +29.8 to -1.5, stronger than expectations of -12.9.

The U.S. Aug import price index ex-petroleum fell -0.2% m/m, a smaller decline than expectations of -0.6% m/m.

U.S Aug manufacturing production unexpectedly rose +0.1% m/m, stronger than expectations of a -0.1% m/m decline.

Today’s stock movers…

Energy stocks and energy service providers are under pressure today, with the price of WTI crude oil down more than -3%.  Baker Hughes (BKR) and Valero Energy (VLO) closed down by more than -4%.  Also, Haliburton (HAL), Diamondback Energy (FANG), Devon Energy (DVN), and Occidental Petroleum (OXY) closed down by more than -3%.  In addition, Exxon Mobil (XOM), Marathon Oil (MRO), and Marathon Petroleum (MPC) closed down by more than -2%.

Adobe (ADBE) closed down more than -16% Thursday to lead losers in the S&P 500 and Nasdaq 100 after forecasting Q4 revenue of $4.52 billion, below the consensus of $4.59 billion, and after it purchased Figma for about $20 billion in a cash and stock deal.

Salesforce (CRM) fell more than -3% Thursday to lead losers in the Dow Jones Industrials after it said it sees U.S. online orders this holiday season falling -5% from 2021 and global e-commerce orders falling -7% as consumer budgets are pinched by inflation.

Phillips 66 (PSX) closed down more than -4% Thursday after Wolfe Research downgraded the stock to peer-perform from outperform.

Managed health care stocks moved higher Thursday after Humana raised its full-year EPS forecast and set a target of $37 for adjusted EPS in 2025, above the consensus of $35. Humana (HUM) closed up more than +8% Thursday to lead gainers in the S&P 500 after it raised its full-year adjusted EPS forecast to $25.00 from a previous forecast of $24.75.  Also, Centene (CNC) closed up more than +2%, and UnitedHealth Group (UNH) closed up more than +2% to lead gainers in the Dow Jones Industrials.  Finally, Molina Healthcare (MOH) closed up more than +1%.

Wynn Resorts (WYNN) closed up more than +7% Thursday after Credit Suisse reinstated coverage of the stock with an outperform rating.

Netflix (NFLX) closed up more than +5% Thursday to lead gainers in the Nasdaq 100 after Evercore ISI upgraded the stock to outperform from in-line.

Allstate (ALL) closed up more than +4% Thursday after it shared an update on auto insurance rates and said during the month of August, it implemented rate increases of 14.5% across 8 locations, resulting in a total Allstate brand insurance premium impact of 3.2%.  It also implemented 72 rate increases averaging approximately 10.3% across 51 locations since the beginning of the year.

Across the markets…

Dec 10-year T-notes (ZNZ22) on Thursday closed down -15 ticks, and the 10-year T-note yield rose +4.9 bp to 3.453%.  Dec T-notes Thursday morning dropped to a 3-month low, and the 10-year T-note yield held just below Wednesday’s 2-3/4 month high of 3.472%.  Stronger-than-expected U.S. economic news Thursday was hawkish for Fed policy and weighed on T-note prices.  The markets have fully priced a 75 bp rate hike at next week’s FOMC meeting.

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