Stocks Slide on Weakness in Technology and Retailers

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Monday closed down -0.89%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.63%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.98%. 

Stock indexes on Monday posted moderate losses as higher T-note yields Monday weighed on technology stocks.  The 10-year T-note yield rose +5.9 bp to 3.872% after Fed Governor Waller said, "we've still got a ways to go" before the Fed stops raising interest rates, despite good news last week on consumer prices. Also, a slide in retailer stocks weighed on the overall market after Amazon announced plans to lay off about 10,000 employees as soon as this week. 

Stock indexes briefly pushed to their highs Monday afternoon on dovish comments from Fed Vice Chair Brainard, who said it's "probably appropriate" for the Fed to soon move to a slower pace of interest rate hikes as risks become more two-sided with more restrictive rates.

Bitcoin fell more than -2% Monday on concern about crypto-contagion from the liquidity crisis that forced FTX.com to file for Chapter 11 bankruptcy last Friday.  The continued weakness in crypto fostered a risk-off atmosphere for the stock market. However, Bitcoin recovered from its worst levels after Binance Holding announced plans to set up a recovery fund to help stabilize the cryptocurrency industry when Binance Holding CEO Zhao said the goal was to “reduce further cascading negative effects” of the FTX.com bankruptcy and assist strong crypto projects facing a liquidity squeeze.

U.S. stock indexes saw early support Monday from hopes that U.S.-China geopolitical risks may ease after U.S. President Biden on Monday met with Chinese President Xi Jinping at the G-20 summit in Indonesia and the White House said Secretary of State Blinkin would travel to China to meet with Chinese officials for additional talks.  Also, China, over the weekend, released a rescue plan for its property sector.

Today’s stock movers…

Technology stocks were under pressure Monday from higher T-note yields and the prediction from Goldman Sachs that in the current interest rate environment, mega-cap tech stocks are collectively expensive relative to bonds and will lag the S&P 500 in Q4.  As a result, Datadog (DDOG) and Okta (OKTA) closed down by more than -5%, and Lam Research (LRCX) closed down by more than -4%.  Align Technology (ALGN) and Illumina (ILMN) closed down more than -3%.  Microsoft (MSFT), Tesla (TSLA), Autodesk (ADSK), and Intuit (INTU) closed down more than -2%.  Analog Devices (ADI) and Micron Technology (MU) closed down more than -1%.

Retailer stocks declined Monday after Amazon.com announced that it plans to lay off about 10,000 employees as soon as this week, which underlined the difficulty retailers are having in the environment of higher interest rates and reduced consumer spending.  Bath & Body Works (BBWI) closed down more than -8%.  Walmart (WMT) closed down more than -2% to lead losers in the Dow Jones Industrials.  In addition, Amazon.com (AMZN), Estee Lauder (EL), and Ralph Lauren (RL) closed down more than -2%. Finally, Lululemon Athletica (LULU) and Ross Stores (ROST) closed down more than -1%. 

Hasbro (HAS) closed down more than -9% Monday to lead losers in the S&P 500 after Bank of America downgraded the stock by two notches to underperform from buy. 

Dentsply Sirona (XRAY) closed down more than -5% after reporting Q3 adjusted net sales of $947 million, weaker than the consensus of $1.03 million, and then cutting its full-year net sales forecast to $3.85 billion-$3.88 billion from a previous forecast of $4.1 billion-$4.2 billion, below the consensus of $4.06 billion.

Moderna (MRNA) closed up more than +4% Monday to lead gainers in the Nasdaq 100 on hopes of increased demand for its bivalent vaccine.  Data showed the company’s booster shot of its bivalent vaccine sharply increased antibody levels against recent Covid strains when compared to the fourth dose of its original immunization.

Merck & Co (MRK) closed up more than +2% to lead gainers in the Dow Jones Industrials after Europe’s Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion recommending approval of the Lynparza drug in combination with abiraterone and prednisone for the treatment of metastatic castration-resistant prostate cancer in adult patients. 

Biogen (BIIB) rose more than +4% to lead gainers in the S&P 500 and Nasdaq 100 after Roche’s Alzheimer’s drug, a potential competitor to Biogen’s, failed a pair of large studies.

Netflix (NFLX) closed up more than +3% after hedge fund Maverick Capital reported it held nearly 352,000 shares of Netflix at the end of Q3.

U.S.-listed Chinese stocks rallied Monday after China put forward a sweeping package to rescue its ailing property sector.  JD.com (JD) closed up more than +3%.  Also, Baidu (BIDU) closed up by more than +2%.  In addition, NetEase (NTES) closed up nearly +1%.

Across the markets…

Dec 10-year T-notes (ZNZ22) on Monday closed down -6 ticks, and the 10-year T-note yield rose +5.9 bp to 3.872%. T-notes prices on Monday were under pressure on hawkish comments from Fed Governor Waller said, "we've still got a ways to go" before the Fed stops raising interest rates.  However, T-notes recovered from their worst levels on dovish comments from Fed Vice Chair Brainard, who said it is "probably appropriate" for the Fed to soon move to a slower pace of interest rate hikes.

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