Stocks Slide Again on Weakness in Tech and Higher Bond Yields

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Monday fell -0.90%, the Dow Jones Industrials Index ($DOWI) (DIA) fell -0.49%, and the Nasdaq 100 Index ($IUXX) (QQQ) fell -1.42%.  The indexes all posted 1-1/4 month lows.

Stocks Monday fell for the fourth consecutive session on concern higher interest rates will push the economy into recession.  Stocks remain under pressure from last week when the Fed signaled it would keep interest rates higher, for longer.

Weakness in chip stocks Monday weighed on technology stocks and the overall market after Bloomberg Intelligence warned that “demand weakness beyond consumer devices creates a high risk of further cuts to chipmaker sales and EPS estimates.”   

Higher global interest rates are bearish for stocks.  Hawkish ECB comments Monday pushed the 10-year German bund yield to a 1-1/4 month high of 2.224%.  That weighed on other global government bond markets as the 10-year UK gilt yield climbed to a 5-week high of 3.484%, and the 10-year T-note yield rose up +9.3 bp to 3.575%.

Monday’s U.S. economic news was bearish for stocks after the Dec NAHB housing market index unexpectedly fell -2 to a 2-1/2 year low of 31, weaker than expectations of an increase to 34.

Morgan Stanley in a note to clients said a looming earnings recession "by itself could be similar to what transpired in 2008/2009," which could spark a new stock-market low that's "much worse than what most investors are expecting."

Today’s stock movers…

Chip stocks retreated Monday after Bloomberg Intelligence warned that “the potential for an economic downturn to push end-market demand weakness beyond consumer devices creates a high risk of further cuts to chipmaker sales and EPS estimates.”  As a result, NXP Semiconductors NV (NXPI) closed down more than -2%. Also,  Nvidia (NVDA), Qualcomm (QCOM), Microchip Technology (MCHP), Advanced Micro Devices (AMD), Broadcom (AVGO), Marvel Technology (MRVL), Lam Research (LRCX), and Texas Instruments (TXN) closed down more than -1%

Walt Disney (DIS) closed down more than -4% to lead losers in the Dow Jones Industrials after it lowered profit guidance on the opening weekend of its Avatar sequel to $130-$150 million from a previous forecast of more than $150 million. 

Vertex Pharmaceuticals (VRTX) closed down more than -4% after Jeffries downgraded the stock to hold from outperform. 

Meta Platforms (META) closed down more than -4% after the company was hit by a formal complaint from European Union watchdogs for allegedly squeezing out classified ad rivals by tying the Facebook Marketplace to its own social network. 

Amazon.com (AMZN) closed down more than -3% after Evercore ISI cut its price target on the stock to $150 from $170, citing “several propriety data points that suggest ongoing softness in online retail and cloud computing demand.”

U.S. casinos with exposure to Macau moved lower Monday after JPMorgan Chase said the renewal of the casinos’ gaming licenses in Macau could prompt trades to book profits following recent rallies.  As a result, Wynn Resorts (WYNN) closed down more than -5%. Also, Caesars Entertainment (CZR) and MGM Resorts International (MGM) closed down more than -4%.  In addition, Las Vega Sands (LVS) closed down more than -2%. 

NRG Energy (NRG) closed up more than +1% to lead gainers in the S&P 500 on signs of insider buying after SEC filings showed President and CEO Guitierrez bought $480,450 of his company’s stock. 

MercadoLibre (MELI) closed up more than +4% to lead gainers in the Nasdaq 100 after equity fund Equitas added the stock to its portfolio and said, “the company continues to grow at impressive rates, gaining share from weakened competitors.”

Quest Diagnostics (DGX) closed up more than +1% on speculation more people will use the company’s blood tests to see if they are qualified to use lecanemab, the first ever drug to clearly slow the progress of Alzheimer’s disease. 

Across the markets…

March 10-year T-notes (ZNH23) on Monday closed down -21.5 ticks, and the 10-year T-note yield rose +9.3 bp to 3.575%. T-note prices Monday were under pressure on negative carry-over from last Friday when several Fed Presidents said they favored higher interest rates for longer.  Also, hawkish ECB comments Monday pushed up European government bond yields and weighed on T-note prices.  The 10-year German bund yield climbed to a 1-1/4 month high of 2.224, and the 10-year UK gilt yield rose to a 5-week high of 3.484%. 

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