Mega-Cap Tech Stocks Drag Nasdaq Lower

What you need to know…

The S&P 500 Index ($SPX) (SPY) this morning is down -0.17%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.55%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.39%. 

Dow Jones Industrials posted a 6-week high but a slump in technology stocks is weighing on the S&P 500 and Nasdaq 100.  Alphabet is down more than -7% after reporting Q3 Google advertising revenue of $54.48 billion, weaker than the consensus of $56.98 billion.  Also, Microsoft is down more than -6% after saying it expects weak PC and ad demand to continue in Q2. 

Chip stocks are also retreating today, with Texas Instruments down more than -3%, after forecasting Q4 revenue of $4.40 billion-$4.80 billion, below the consensus of $4.93 billion.

On the positive side for stocks, shares of Visa are up more than +4% to lift the Dow Jones Industrials into positive territory after reporting stronger-than-expected quarterly earnings and boosting its quarterly dividend. Also, shares of Universal Health Services, Hilton Worldwide Holdings, and Bunge Ltd are climbing after reporting better-than-expected Q3 earnings results.  In addition, a decline in T-note yields is supportive for stocks as the 10-year T-note yield today fell to a 1-week low of 3.990%.

This morning's U.S. economic news was mixed for stocks.  Sep wholesale inventories rose +0.8% m/m, weaker than expectations of +1.0% m/m.  Also, Sep retail inventories rose +0.4% m/m, weaker than expectations of +1.2% m/m.  Still, the rise in inventories is negative for the economy since it suggests weak demand and excess production.  Sep new home sales fell -10.9% m/m to 603,000, stronger than expectations of 580,000.

Today’s stock movers…

Alphabet (GOOGL) is down more than -7% today to lead losers in the Nasdaq 100 after reporting Q3 Google advertising revenue of $54.48 billion, weaker than the consensus of $56.98 billion.  Other mega-cap tech stocks are also sliding, with Amazon.com (AMZN) down more than -4% and Meta Platforms (META) down more than -3%.

Microsoft (MSFT) is down more than -6% today to lead losers in the Dow Jones Industrials after saying it expects weak PC and ad demand to continue in Q2 and said that Q2 dollar strength cut sales growth by -5%.

Chip stocks are falling today, led by a -3% drop in Texas Instruments (TXN), after it forecasted Q4 revenue of $4.40 billion-$4.80 billion, below the consensus of $4.93 billion.  Also, Nvidia (NVDA) and Analog Devices (ADI) are down more than -2%.  Advanced Micro Devices (AMD), Microchip Technology (MCHP), and Marvell Technology (MRVL) are down more than -1%.

F5 Inc (FFIV) is down more than -9% today to lead losers in the S&P 500 after forecasting Q1 adjusted EPS of $2.25-$2.37, below the consensus of $2.59. 

Seagate Technology Holding Plc (STX) is down more than -10% today after forecasting Q2 revenue of $1.70 billion-$2.00 billion, weaker than the consensus of $2.22 billion, and said it would reduce its employees by about 3,000 as part of a restructuring plan. 

Universal Health Services (UHS) is up more than +11% today after reporting Q3 adjusted EPS of $2.54, stronger than the consensus of $2.38.   

Visa (V) is up more than +4% today to lead gainers in the Dow Jones Industrials after reporting Q4 adjusted EPS of $1.93, better than the consensus of $1.86, and then boosting its quarterly dividend to 45 cents a share from 37.5 cents, above the consensus of 42.5 cents. 

U.S.-listed Chinese stocks are climbing today after the People’s Bank of China (PBOC) and the State Administration of Foreign Exchange said they would enhance coordination with other agencies to ensure the soundness of the equity, bond, and real estate markets.  Pinduoduo (PDD) is up more than +10 to lead gainers in the Nasdaq 100.  Also, Alibaba Group Holding (BABA) is up more than +6%, and JD.com (JD) is up more than +5%.  In addition, Baidu (BIDU) is up more than +4%, and NetEase (NTES) is up more than +1%. 

Across the markets…

Dec 10-year T-notes (ZNZ22) today are up by +16 ticks, and the 10-year T-note yield is down -7.8 bp at 4.024%.  Dec T-notes climbed to a 1-week high today, and the 10-year T-note yield fell to a 1-week low of 3.990%.  A rally in German bunds today is providing carry-over support to T-note prices.  The 10-year German bund yield dropped to a 2-1/2 week low of 2.111%.  A selloff in stocks today is also boosting the safe-haven demand for T-notes.

Supply pressures may limit further gains in T-note prices as the Treasury will auction $24 billion of 2-year floating-rate notes and $43 billion of 5-year T-notes later today as part of this week’s auction package of $144 billion of T-notes and floating-rate notes. 

The dollar index (DXY00) this morning is down by -0.52% at a 5-week low.  Lower T-note yields today have weakened the dollar’s interest rate differentials and are weighing on the dollar.  The dollar is also lower on speculation that recent weaker-than-expected U.S. economic data will prompt the Fed to slow the pace of its rate hikes.

EUR/USD (^EURUSD) today is up by +0.52% and posted a 5-week high. Dollar weakness today has sparked short covering in the euro.  EUR/USD also has support on expectations that the ECB will increase interest rates by +75 bp at this Thursday’s policy meeting.

Today’s Eurozone economic news was mixed for EUR/USD.  On the positive side, French Oct consumer confidence unexpectedly rose +3 to 82, stronger than expectations of a decline to 77.  Conversely, Eurozone Sep M3 money supply rose +6.3% y/y, stronger than expectations of +6.0% y/y and the fastest pace of increase in 7 months. 

USD/JPY (^USDJPY) today is down by -0.58%.  The yen is moderately higher today and is finding support on lower T-note yields.   The yen also moved higher today after the Japan Aug leading index CI was revised upward by +0.4 to a 4-month high of 101.3 from the previously reported 100.9.  A bearish factor for the yen was today’s action by the BOJ to increase its purchases of 10-year to 25-year debt by 100 billion yen to 350 billion yen and increased purchases of debt due in more than 25 years by 50 billion yen to 150 billion yen. The BOJ is boosting its bond purchases to keep the 10-year JGB bond yield from climbing above the 0.25% upper limit of its targeted yield range of 0.00%-0.25%. 

December gold (GCZ2) is up +12.9 (+0.78%), and December silver (SIZ22) is up +0.211 (+1.09%).  Precious metals this morning are moderately higher, with gold climbing to a 1-1.2 week high and silver climbing to a 2-week high.  A weaker dollar is bullish for metals prices as the dollar index today dropped to a 5-week low.  Also, lower global government bond yields today are bullish for gold prices.  Gold continues to be undercut by fund liquidation as long positions in gold ETF’s dropped to a 2-1/2 year low Tuesday. 

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