Stocks Close Lower as Tesla and Apple Slide

What you need to know…

The S&P 500 Index ($SPX) (SPY) Tuesday closed down -0.40%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.03%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.70%.

Stocks on Tuesday closed gave up an early advance and closed lower.  The S&P 500 and Nasdaq 100 Tuesday fell back from 1-1/2 week highs and turned lower on losses in Tesla and Apple.  Tesla closed down more than -12% after reporting fewer-than-expected vehicle deliveries in Q4, and Apple closed down more than -3% after Nikkei reported the company had told several suppliers to make fewer components for its product due to demand concerns.

Stock indexes were also undercut Tuesday by weakness in energy producers after the price of WTI crude oil sank more than -4%.  However, the Dow Jones Industrials recovered nearly all of its losses after Boeing climbed more than +2% when JPMorgan said the company would top its delivery goal of 737 jetliners delivered for 2022.

The S&P 500 and Nasdaq 100 on Tuesday initially rallied to 1-1/2 week highs on carry-over strength from a rally in other world equity markets on hopes that Covid has peaked in China.  A recovery in subway use in major cities in China indicates Covid infections in China may have peaked.  Market sentiment is also improving on hopes that supply chain issues in China will continue to ease, which could help bring down inflation. 

In addition, U.S. stocks had support from a rally in European stocks after news that German December consumer prices rose at a slower pace than expected and German unemployment in December unexpectedly declined. 

Stocks saw support Tuesday from an -8.5 bp decline in the 10-year T-note yield to 3.790%.  T-note yields moved lower on carry-over after the 10-year German bund yield Tuesday fell to a 2-week low when German Dec CPI rose less than expected. 

Tuesday’s U.S. economic news was mildly supportive for stocks. Nov construction spending unexpectedly rose +0.2% m/m, stronger than expectations of a -0.4% m/m decline. Also, the Dec S&P Global manufacturing PMI was unchanged at 46.2, right on expectations.

Overseas stock markets Tuesday closed higher.  The Euro Stoxx 50 index closed up +0.68%.  The Shanghai Composite index closed up +0.88%, and Japan’s Nikkei Stock index did not trade with markets in Japan closed for the New Year holiday.

Today’s stock movers…

Tesla (TSLA) closed down more than -12% Tuesday at a 2-year low to lead losers in the S&P 500 and Nasdaq 100 after reporting it delivered 405,268 vehicles in Q4, below the consensus of 420,760.

Apple (AAPL) closed down more than -3% to lead losers in the Dow Jones Industrials after Nikkei reported the company had told several suppliers to make fewer components for AirPods, Apple Watches, and MacBooks for Q1 due to weakening demand. 

Energy stocks and energy service providers retreated Tuesday after WTI crude oil tumbled more than -4%.  APA Corp (APA) closed down more than -6%. Also, Devon Energy (DVN), Marathon Oil (MRO), and Valero Energy (VLO) closed down more than -5%. In addition, ConocoPhillips (COP), Haliburton (HAL), and Marathon Petroleum (MPC) closed down more than -4%. Finally, Exxon Mobil (XOM), Chevron (CVX), and Schlumberger (SLB) closed down more than +3%.

Molson Coors Beverage (TAP) closed down more than -4% after Wells Fargo downgraded the stock to underweight from equal weight, saying it sees a “significant downside” to consensus earnings estimates in 2023. 

Molina Healthcare (MOH) closed down more than -3% after Centene Corp won contracts to run U.S. Medicaid plans in Los Angeles County and other large California markets where it had previously been excluded for 2024, a move seen undercutting the earnings of Molina Healthcare.

Newmont Corp (NEM) closed up more than +5% Tuesday to lead gainers in the S&P 500 as mining stocks rallied after gold prices jumped to a 6-1/2 month high and silver prices soared to an 8-1/2 month high. 

Boeing (BA) closed up more than +2% to lead gainers in the Dow Jones Industrials after JPMorgan Chase said the company likely delivered 49 of its 737 jetliners in December, bringing its yearly total to 382 deliveries, above its target of 375 planes delivered for 2022. 

PayPal Holdings (PYPL) closed up more than +4% to lead gainers in the Nasdaq 100 after Truist Securities upgraded the stock to buy from hold with a price target of $95. 

U.S.-listed Chinese stocks moved higher amid signs that Covid infections in China may have peaked.  NetEase (NTES) closed up more than +5%.  Also, Baidu (BIDU) and Alibaba Group Holding (BABA) closed up more than +4%.  In addition, Pinduoduo (PDD) closed up more than +3%, and JD.com (JD) closed up more than +3%. 

U.S. casino operators with exposure to Macau rose Tuesday after JPMorgan Chase said it remains bullish on the operators heading into this year.  Melco Resorts & Entertainment (MLCO) closed up more than +4%.  Also, Wynn Resorts (WYNN) closed up more than +3%, and Las Vegas Sands (LVS) closed up more than +2%.

Across the markets…

March 10-year T-notes (ZNH23) on Tuesday closed up +11 ticks, and the 10-year T-note yield fell by -8.5 bp to 3.790%.  T-notes Tuesday posted moderate gains on carry-over support from a rally in European government bonds.  The 10-year UK gilt yield fell to a 2-week low Tuesday at 3.537%, and the 10-year German bund yield fell to a 1-1/2 week low of 2.342%. Also, weak stocks Tuesday boosted some safe-haven demand for T-notes, and a fall of more than -4% in WTI crude prices reduced inflation expectations.

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