Stocks Slide on Losses in Chipmakers

What you need to know…

The S&P 500 Index ($SPX) (SPY) this morning is down -0.52%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.22%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.95%. 

Stocks this morning are moderately lower, with the Nasdaq 100 falling to a 2-year low.  Weakness in semiconductor stocks weighs on the Nasdaq 100 and the overall market after the U.S. Commerce Department Friday imposed fresh curbs on China's access to American technology. Also, automakers are under pressure today after UBS downgraded Ford and General Motors.  On the positive side is strength in food companies after Goldman Sachs said it is positive on the sector.  Overall trading activity may be muted today, with the cash government bond market closed for Columbus Day.

Global semiconductor stocks fell today after the U.S. Commerce Department Friday imposed fresh curbs on China's access to American technology.  The restrictions include the export of U.S. chips used in artificial intelligence and supercomputing and tighter rules on the sale of semiconductor equipment to any Chinese company.

Comments today from Chicago Fed President Evans were hawkish for Fed policy and bearish for stocks when he said, "inflation has been persistent, and we need to see it come down."  He added, "I see the nominal funds rate rising to 4.5% early next year and then remaining at this level for some time while we assess how our policy adjustments are affecting the economy."

Today’s stock movers…

Chip stocks are under pressure today and are weighing on the overall market after the U.S. Commerce Department Friday imposed fresh curbs on China's access to American technology.  Lam Research (LRCX) is down more than -7% to lead losers in the Nasdaq 100.  Also, Qualcomm (QCOM), Applied Materials (AMAT), and ON Semiconductor Corp (ON) are down more than -4%.  In addition,  Nvidia (NVDA), Advanced Micro Devices (AMD), Analog Devices (ADI),  Broadcom (AVGO), and Microchip Technology (MCHP) are down more than -3%.

Automakers are weaker today after UBS downgraded Ford Motor and General Motors.  Ford Motor (F) is down more than -7% after UBS downgraded it to sell from neutral, citing weak profit margins.  General Motors (GM) is down more than -6% after UBS downgraded the stock to neutral from buy, saying it sees “demand destruction” for GM’s electric vehicle segment. 

U.S.-listed Macau casino operators are tumbling today after Citigroup cut its estimate from Macau’s gross gaming revenue in October to 5.5 billion patacas from 7 billion patacas, citing disappointing revenue during the first nine days of this month.  Wynn Resorts (WYNN) is down more than -8% to lead losers in the S&P 500.  Also, Las Vegas Sands (LVS) is down more than -6%, and MGM Resorts International (MGM) is down more than -2%.

U.S.-listed Chinese stocks are moving lower today, with sentiment hurt by weak holiday spending data during the Golden Week holiday and new Covid flareups that sparked fresh pandemic restrictions.  Pinduoduo (PDD) is down more than -7%.  Also, Baidu (BIDU) and JD.com (JD) are down more than -3%.  In addition, Alibaba Group Holding (BABA) is down more than -2%.

Merck & Co (MRK) is up more than +3% today to lead gainers in the S&P 500 after saying a phase 3 trial of its sotatercept drug for treating pulmonary arterial hypertension met primary efficacy outcome measures.

Kraft Heinz Foods (KHC) is up more than +2% today after Goldman Sachs upgraded it to buy from neutral. 

Food companies are climbing today after Goldman Sachs said it is more positive on the sector as price increases are likely to be larger and longer lasting than previously thought, helping to support gross margin recovery as input costs subside.  JM Smucker (SJM), Conagra Brands (CAG), McCormick & Co (MKC), Archer-Daniels-Midland (ADM), and Campbell Soup (CPB) are up more than +2%. 

Fortinet (FTNT) is up more than +2% today after Morgan Stanley upgraded the stock to overweight from equal weight. 

Across the markets…

Dec 10-year T-notes (ZNZ22) today are down -2.5 ticks.  There is no cash trading of government bonds today due to the Columbus Day holiday. Dec-T-notes are slightly lower today on negative carry-over from last Friday’s stronger-than-expected U.S. Sep payrolls report today. 

The dollar index (DXY00) this morning is up by +0.27% and climbed to a new 1-week high.   Hawkish comments this morning from Chicago Fed President Evans boosted the dollar when he said he sees the nominal funds rate rising to 4.5% early next year.  The dollar also has safe-haven demand from geopolitical tensions on signs of escalation in the war in Ukraine after Russia launched its most intense barrage of missile strikes on cities in Ukraine today since the beginning of the war. 

EUR/USD (^EURUSD) today is down by -0.45% and posted a new 1-week low. A stronger dollar today is undercutting EUR/USD.  Also, a plunge in Eurozone investor confidence is bearish for the euro after today’s economic news showed Eurozone Oct Sentix investor confidence fell to a 2-1/4 year low.

ECB Governing Council member Knot said he sees "at least two significant rate hikes" at the next two ECB policy meetings before the ECB can begin shrinking its balance sheet.

Eurozone Oct Sentix investor confidence fell -6.5 to a 2-1/4 year low of -38.3, weaker than expectations of -34.7.

USD/JPY (^USDJPY) today is up +0.23% at a 2-week high.  The yen slid today to a 2-week low against the dollar. Trading activity in the yen is muted, with Japanese markets closed today for the Health Sports Day holiday.   The yen fell today to 145.67, just above the 145.90 level where Japan had intervened previously in the currency market to support the yen.   

December gold (GCZ2) is down -26.1 (-1.53%), and December silver (SIZ22) is down -0.505 (-2.49%).  Precious metals this morning are moderately lower.  A rally in the dollar index today to a 1-week high is weighing on metals prices. Also, higher European government bond yields today are bearish for gold prices.  In addition, gold prices continue to be undercut by fund liquidation as long positions in gold ETF’s dropped to a new 2-1/4 year low last Friday. 

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