Stocks Fall Sharply on Tech Weakness and Hawkish Economic News

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Thursday fell -1.45%, the Dow Jones Industrials Index ($DOWI) (DIA) fell -1.05%, and the Nasdaq 100 Index ($IUXX) (QQQ) fell -2.49%.

Stocks on Thursday fell sharply, with the S&P 500, Dow Jones Industrials, and the Nasdaq 100 all posting 6-week lows.  Technology stocks were battered Thursday.  Semiconductor stocks sold off after Micron Technology reported lower-than-expected Q1 adjusted revenue and forecasted that Q2 revenue would be below consensus.  Also, Tesla tumbled more than -8% to a 2-year low after safety investigators said they were looking into a crash on the San Francisco Bay Bridge involving a Tesla Model S that may have been guided by its automated systems.

Stock indexes were undercut by Thursday’s stronger-than-expected jobless claims and Q3 GDP reports, which were hawkish for Fed policy.  Stocks recovered from their worst levels after the Senate passed a $1.7 trillion government funding bill that now heads to the House, where passage is expected to prevent a December 24 government shutdown. 

U.S. weekly initial unemployment claims rose +2,000 to 216,000, showing a stronger labor market than expectations of an increase to 222,000.

U.S. Q3 GDP was revised upward by +0.3 to 3.2% (q/q annualized), stronger than expectations of unchanged at 2.9%, as Q3 personal consumption was revised upward by +0.6 percentage points to 2.3% from 1.7%.  Also, the Q3 core PCE deflator was revised upward to 4.7% from 4.6%.

U.S. Nov leading indicators fell -1.0% m/m, weaker than expectations of -0.5% m/m and the largest decline in 2-1/2 years.

Today’s stock movers…

Tesla (TSLA) closed down more than -8% Thursday at a 2-year low, leading losers in the S&P 500 and Nasdaq 100, after the U.S. National Highway Safety Administration said it opened an investigation into a crash on the San Francisco-Oakland Bay Bridge involving a Tesla Model S that may have been guided by its automated systems. 

Chip stocks sold off after Micron Technology reported Q1 adjusted revenue of $4.09 billion, below the consensus of $4.13 billion, and forecasted Q2 adjusted revenue of $3.6 billion-$4.0 billion, the midpoint below the consensus of $3.88 billion.

As a result, Lam Research (LRCX) closed down more than -8%, and Nvidia (NVDA) and Applied Materials (AMAT) closed down more than -7%.  Advanced Micro Devices (AMD) closed down more than -5%, and Marvell Technology (MRVL), Microchip Technology (MCHP), and ASML Holding NV (ASML) closed down more than -4%. Micron Technology (MU), Qualcomm (QCOM), NXP Semiconductor NV (NXPI), and Intel (INTC) closed down more than -3%.

Cruise line stocks retreated after Credit Suisse cut its price target on Carnival to $16 from $19.  As a result, Carnival (CCL) closed down more than -7%.  Royal Caribbean Cruises (RCL) and Norwegian Cruise Line Holdings (NCLH) closed down more than -4%.

CarMax (KMX) closed down more than -3% after reporting Q3 EPS of 24 cents, well below the consensus of 65 cents.

Microsoft (MSFT) closed down more than -2% after it was fined 60 million euros ($64 million) by France’s data protection authority over the way it manages cookies on its bing.com search engine.  France ordered Microsoft to make the bing.com cookies more customer friendly. 

FedEx (FDX) closed up more than +3% Thursday to lead gainers in the S&P 500 as it extended Wednesday’s +3% rally after it reported Q2 adjusted EPS of $3.18, stronger than the consensus of $2.80.

Charter Communications (CHTR) closed up nearly +1% after Wells Fargo Securities upgraded the stock to equal weight from underweight.

Crown Castle (CCI) closed up +0.8% after Moody’s Investors Service raised its long-term rating outlook on the company to positive from stable.

Across the markets…

March 10-year T-notes (ZNH23) on Thursday closed down -0.5 tick, and the 10-year T-note yield rose +1.1 bp to 3.673%. T-note prices were under pressure Thursday from the stronger-than-expected U.S. jobless claims and Q3 GDP reports.  Also, a jump in German bund yields weighed on T-note prices after the 10-year German bund yield climbed to a 2-month Thursday of 2.385%.  However, T-notes recovered almost all their early losses Thursday after a sharp stock market selloff boosted safe-haven demand for government debt. 

• Tech Stocks May Find Continued Rough Sledding in Early 2023
• Stocks Slide on Chip Stocks and Hawkish Economic News
• CarMax (KMX) May Be a Surprising Bet for Bullish Contrarians
• Markets Today: Stocks Fall on Weak Revenue Outlook from Micron