Stocks Moderately Lower on Weakness in Technology Stocks

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.89%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.48%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.44%.  

Stocks this morning are moderately lower.  A selloff in chip stocks today is weighing on technology stocks and the overall market after recent sales information from the Semiconductor Industry Association shows ongoing weakness with memory products.   Also, a slump of more than -6% in Meta Platforms is negative for the overall market, on a report that said the European Union is targeting Facebook’s ad model. 

Global stock markets have carry-over support today from a rally in China’s Shanghai Composite Stock Index to a new 2-1/2 month high as the Chinese government accelerates the easing of Covid restrictions.  Beijing today joined Shanghai, Shenzhen, Guangzhou, and other major Chinese cities in scrapping Covid testing requirements to enter most public venues. 

Lower bond yields are also supportive for stocks as the 10-year T-note yield today is down -1.7 bp at 3.559%.  Fed officials have recently signaled that the Fed will downshift to a +50 bp rate hike at next week’s FOMC meeting after four straight +75 bp increases. 

Today’s stock movers…

Semiconductor stocks are under pressure today after October sales data from the Semiconductor Industry Association shows ongoing weakness with memory products.  As a result, advanced Micro Devices (AMD) is down more than -3%.  Also, Nvidia (NVDA), Qualcomm (QCOM), Marvell Technology (MRVL), Align Technology (ALGN), and Lam Research (LRCX) are down more than -2%. 

NRG Energy (NRG) is down more than -12% today to lead losers in the S&P 500 after agreeing to buy Vivint Smart Home for $2.8 billion. 

Meta Platforms (META) is down more than -6% following a Wall Street Journal report about privacy regulators at the European Union ruling that Facebook shouldn’t require users to agree to personalized ads based on their online activity, which could limit the data that Facebook can access to sell such ads. 

Tesla (TSLA) is down more than -3% after the company said it plans to cut electric vehicle production at its Shanghai plant by about 20% from last month, a sign that demand in China isn’t meeting expectations. 

Edwards Lifesciences (EW) is down more than -2% after Stifel downgraded the stock to hold from buy. 

Kimberly-Clark (KMB) is down more than -1% after Deutsche Bank downgraded the stock to sell from hold.

Textron (TXT) is up more than +6% to lead gainers in the S&P 500 after the U.S. Army selected the company to build the Future Long-Range Assault Aircraft helicopter in a contract worth up to $1.3 billion.

General Electric (GE) is up more than +1% after Oppenheimer upgraded the stock to outperform from neutral.

Alcoa (AA) is up more than +3% after Bloomberg reported that the U.S. and EU are weighing climate-based tariffs on Chinese steel and aluminum. 

U.S.-listed Chinese stocks are moving higher as China accelerates the easing of Covid restrictions after Beijing today joined Shanghai, Shenzhen, Guangzhou, and other major Chinese cities in scrapping Covid testing requirements to enter most public venues. Baidu (BIDU), Alibaba Group Holding (BABA), and JD.com (JD) are up more than +1%. 

Across the markets…

March 10-year T-notes (ZNH23) today are up +6 ticks, and the 10-year T-note yield is down -1.7 bp at 3.559%.  T-note prices are modestly higher today on carry-over support from a rally in European government bond prices.  The 10-year German bund yield is down -6.4 bp to 1.816%, and the 10-year UK gilt yield is down -4.4 bp to 3.061%. 

The dollar index (DXY00) this morning is down by -0.11%.  The dollar today is moderately lower due to a decline in T-note yields.  The dollar was also undercut by news that the U.S Oct trade deficit widened to a 4-month high. 

EUR/USD (^EURUSD) today is up by +0.22%.  A weaker dollar today has sparked some short covering in EUR/USD. The euro also found support after today’s economic news showed that German Oct factory orders rose more than expected.  However, gains in EUR/US were limited after the German Nov S&P Global construction PMI contracted by the most in 1-3/4 years.

German Oct factory orders rose +0.8% m/m, stronger than expectations of +0.1% m/m. 

The German Nov S&P Global construction PMI fell -2.3 to 41.5, the steepest pace of contraction in 1-3/4 years.

USD/JPY (^USDJPY) this morning is down by -0.24%.  Lower T-note yields today are bullish for the yen. However, gains in the yen are limited by comments from BOJ Governor Kuroda, who said it is too early for the BOJ to end its asset purchases and the BOJ won’t quit easing even if wages grow by 3% as long as there is no sustainable inflation.

Today’s Japanese economic news was mixed for the yen.  On the positive side, Oct household spending rose +1.2% y/y, stronger than expectations of +0.9% y/y.  Conversely, Oct real cash earnings fell -2.6% y/y, weaker than expectations of -2.2% y/y and the biggest decline in more than seven years.

February gold (GCG3) this morning is up +9.2 (+0.52%), and March silver (SIH23) is up +0.268 (+1.20%).  Precious metals prices this morning are moderately higher.  A weaker dollar today is supportive of metals prices.  Gold prices are also garnering support today from lower global government bond yields.  An easing of Chinese Covid curbs may boost economic activity that is supportive of industrial metals demand and silver prices after Beijing today joined Shanghai, Shenzhen, Guangzhou, and other major Chinese cities in scrapping Covid testing requirements to enter most public venues.  Gold continues to be undercut by fund liquidation as long positions in gold ETF’s dropped to a new 2-1/2 year low Monday.

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