Stocks Dragged Lower by Losses in Apple

What you need to know…

The S&P 500 Index ($SPX) (SPY) Friday closed down -0.53%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.43%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.51%.

Stocks on Friday gave up an early advance and closed moderately lower, with the S&P 500 and Nasdaq 100 falling to 3-week lows and the Dow Jones Industrials falling to a 2-week low.  Accelerating losses in Apple, which opened down more than -2% and extended its losses to more than -4%, weighed on the overall market after it delivered a lackluster outlook for its fourth quarter.

Stocks on Friday initially moved higher after a smaller-than-expected increase in U.S. Jul nonfarm payrolls knocked T-note yields lower. Stocks then extended their gains mid-morning as T-note yields fell even further on dovish comments from Atlanta Fed President Bostic, who said there is no need to raise interest rates further to ease inflation.

U.S. Jul nonfarm payrolls rose +187,000, below expectations of +200,000.  However, the Jul unemployment rate unexpectedly fell -0.1 to 3.5%, showing a stronger labor market than expectations of 3.6%.

U.S. Jul average hourly earnings rose +0.4% m/m and +4.4% y/y, stronger than expectations of +0.3% m/m and +4.2% y/y, which was hawkish for Fed policy.

Fed comments today were dovish for Fed policy and bullish for stocks.  Atlanta Fed President Bostic said U.S. employment gains are slowing in an orderly manner, and there is no need to raise interest rates further to ease inflation. Also, Chicago Fed President Goolsbee said we've been getting promising numbers on inflation, and the Fed should start thinking about how long to hold interest rates in restrictive territory.

The markets are discounting the odds at 12% for a +25 bp rate hike at the September 20 FOMC meeting, falling from 17% on Thursday. 

Global bond yields on Friday moved lower.  The 10-year T-note yield fell back from an 8-3/4 month high of 4.204% and finished down -11.9 bp at 4.056%.  The 10-year German bund yield fell from a 3-week high of 2.651% and finished down -4.3 bp at 2.562%.  The 10-year UK gilt yield fell back from a 2-1/2 week high of 4.499% and finished down -9.1 bp at 4.383%. 

Overseas stock markets Friday settled higher.  The Euro Stoxx 50 closed up +0.66%.  China’s Shanghai Composite Index today closed up +0.23%.  Japan’s Nikkei Stock Index closed up +0.10%.

Today’s stock movers…

Cybersecurity stocks sold off Friday after Fortinet reported Q2 billings of $1.54 billion, below the consensus of $1.59 billion, and cut its full-year billings forecast to $6.49 billion-$6.59 billion from a previous estimate of $6.75 billion-$6.81 billion, well below the consensus of $6.79 billion.  As a result, Fortinet (FTNT) closed down more than -25% to lead losers in the S&P 500 and Nasdaq 100.  Also, Palo Alto Networks (PANW) closed down more than -8%, Crowdstrike Holdings (CRWD) closed down more than -4%, and Zscaler (ZS) closed down more than -3%.

ResMed (RMD) closed down more than -18% after reporting Q4 adjusted EPS of $1.60, weaker than the consensus of $1.70. 

Extra Space Storage (EXR) closed down more than -9% after reporting Q2 core FFO/share at $2.06, below the consensus of $2.14, and forecast full-year core FFO/share of $8.15-$8.35, weaker than the consensus of $8.48.

Microchip Technology (MCHP) closed down more than -7% after forecasting Q2 net sales of $2.22 billion-$2.31 billion, the midpoint below the consensus of $2.28 billion.

Apple (AAPL) closed down more than -4% to lead losers in the Dow Jones Industrials after reporting Q3 iPhone revenue of $39.67 billion, below the consensus of $39.80 billion, and said Q4 year-over-year performance to be similar to Q3. 

Ventas (VTR) closed down more than -6% after forecasting full-year normalized FFO/share of $2.92 to $3.00, the midpoint below the consensus of $3.00.

Redfin (RDFN) closed down more than -25% after reporting a Q2 Ebitda loss of -$6.93 million, a larger loss than the consensus of -$3.23 million, and forecast Q3 adjusted Ebitda of $4 million-$14 million, weaker than the consensus of $21.8 million. 

Monster Beverage (MNST) closed down more than -4% after reporting Q2 net sales of $1.85 billion, weaker than the consensus of $1.87 billion.

CSX Corp (CSX) closed down more than -4% after announcing that Jamie Boychuk, executive vice president of operations, is leaving the company, and a search for a successor is ongoing.

Amazon.com (AMZN) closed up more than +8% after reporting Q2 net sales of $134.38 billion, stronger than the consensus of $131.63 billion, and forecasting Q3 net sales of $128 billion-$143 billion, above the consensus of $138.3 billion. 

Atlassian (TEAM) closed up more than +17% to lead gainers in the Nasdaq 100 after reporting Q4 revenue of $939.1 million, better than the consensus of $915.7 million, and forecast Q1 revenue of $950 million-$970 million, above the consensus of $955.7 million.

Booking Holdings (BKNG) closed up more than +7% after reporting Q2 revenue of $5.46 billion, stronger than the consensus of $5.17 billion.  That prompted CFRA to upgrade the stock to buy from hold. 

Gen Digital (GEN) closed up more than +7% after reporting Q1 adjusted EPS of 47 cents, better than the consensus of 46 cents. 

DaVita (DVA) closed up more than +7% after reporting Q2 operating income of $405.3 million, stronger than the consensus of $381 million, and raising its full-year free cash flow estimate to $850 million-$1.10 billion from a prior view of $750 million-$1.0 billion, better than the consensus of $899.5 million. 

Amgen (AMGN) closed up more than +5% to lead gainers in the Dow Jones Industrials after forecasting Q2 adjusted EPS of $5.00, well above the consensus of $4.48, and raising its full-year adjusted EPS estimate to $17.80-$18.80 from a previous estimate of $17.60-$18.70. 

Gilead Sciences (GILD) closed up more than +4% after reporting Q2 revenue of $6.60 billion, above the consensus of $6.44 billion, and raised its forecast for full-year product sales to $26.3 billion-$26.7 billion from a previous estimate of $26.0 billion-$26.5 billion.

Cboe Global Markets (CBOE) closed up more than +3% after reporting Q2 adjusted Ebitda of $293.3 million, better than the consensus of $289.1 million.

Stryker (SYK) closed up more than +2% after reporting Q2 net sales of $5.00 billion, better than the consensus of $4.82 billion. 

Across the markets…

September 10-year T-notes (ZNU23) Friday closed up +29 ticks, and the 10-year T-note yield fell -11.9 bp to 4.056%.  Sep T-notes Friday recovered from an 8-3/4 month low and moved higher, and the 10-year T-note yield fell back from an 8-3/4 month high of 4.204% and moved lower.  T-notes rallied Friday after U.S. Jul nonfarm payrolls rose less than expected. Gains accelerated after Atlanta Fed President Bostic said U.S. employment gains are slowing in an orderly manner, and there is no need to raise interest rates further to ease inflation. An afternoon slide in stocks Friday also gave T-notes a boost.  On the negative side, the U.S. Jul unemployment rate unexpectedly declined, and Jul average hourly earnings rose more than expected.

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