Stocks Fade on Weakness in Technology and Bank Shares

What you need to know…

The S&P 500 Index ($SPX) (SPY) Tuesday closed down -0.28%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.51%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.19%.

Stocks on Tuesday settled moderately lower.  Technology stocks gave up early gains and turned lower to weigh on the overall market after Nvidia, which had risen more than +2% early Tuesday to a record high, reversed course and fell more than -2% and undercut tech stocks.  Also, regional bank stocks were under pressure Tuesday after S&P Global Ratings joined Moody’s Investors Service in cutting the ratings on some banks amid a “tough” climate.  U.S. economic news today was mixed for stocks after July existing home sales fell more than expected to a 6-month low, but the Aug Richmond Fed manufacturing survey unexpectedly rose to a 7-month high.

Global equity markets have some positive carryover from a late surge in Chinese stocks after the Shanghai Composite Stock Index recovered from a 7-1/2 month low in the last hour of trade today and settled higher, which boosted market sentiment. 

U.S. Jul existing home sales fell -2.2% to a 6-month low of 4.07 million, weaker than expectations of 4.15 million.

The U.S. Aug Richmond Fed manufacturing survey unexpectedly rose +2 to a 7-month high of -7, stronger than expectations of a decline to -10.

The markets are discounting the odds at 16% for a +25 bp rate hike at the September 20 FOMC meeting and 47% for that +25 bp rate hike at the November 1 FOMC meeting. 

Global bond yields Tuesday moved lower.  The 10-year T-note yield fell back from a nearly 16-year high of 4.362% and fell -0.6 bp at 4.332%.  The 10-year German bund yield fell -5.9 bp at 2.645%.  The 10-year UK gilt yield fell -8.5 bp at 4.645%. 

Overseas stock markets Tuesday settled higher.  The Euro Stoxx 50 closed up +0.84%.  China’s Shanghai Composite Index closed up +0.88%. Japan’s Nikkei Stock Index closed up +0.92%.

Today’s stock movers…

Nvidia (NVDA) fell back from a record high and closed down more than -2% on profit-taking and long liquidation ahead of its quarterly earnings results on Wednesday. 

Bank stocks retreated Tuesday after S&P Global Ratings lowered the long-term credit ratings on a handful of regional lenders.  As a result, Regions Financial (RF) closed down more than -5%.  Also, Zions Bancorp (ZION), Huntington Bancshares (HBAN), and KeyCorp (KEY) closed down more than -4%.  In addition, Synchrony Financial (SYF), Fifth Third Bancorp (FITB), and PNC Financial Service Group (PNC) closed down more than -3%.  Finally, JPMorgan Chase (JPM) closed down more than -2% to lead losers in the Dow Jones Industrials, and US Bancorp (USB), Citizens Financial Group (CFG), Lincoln National (LNC), and Northern Trust (NTRS) closed down more than -2%. 

Charles Schwab (SCHW) closed down more than -4% after it said it plans to shutter or downsize some real estate and lower headcounts and will sell $2.35 billion of senior unsecured notes to raise cash. 

Dick’s Sporting Goods (DKS) closed down more than -24% after reporting Q2 adjusted EPS of $2.82, weaker than the consensus of $3.81, and lowered its 2024 adjusted EPS forecast to $11.50-$12.30 from a prior forecast of $12.90-$13.80, well below the consensus of $13.47. 

Macy’s (M) closed down more than -14% after forecasting Q3 adjusted EPS of a loss of -2 cents to a gain of +3 cents per share, well below the consensus of +27 cents per share. 

BJ’s Wholesale Club Holdings (BJ) closed down more than -5% after reporting Q2 comparable club sales excluding gasoline rose +1.1%, weaker than the consensus of +2.17%, and cutting its 2024 comparable club sales forecast excluding gasoline to +2% from a prior view of +4% to +5%, below the consensus of +3.51%.

Zoom Video Communications (ZM) gave up an early advance and closed down more than -2% despite reporting better-than-expected Q2 results, as several analysts noted some concerns about longer-term growth visibility. 

Target (TGT) closed down more than -2% after Daiwa Securities downgraded the stock to neutral from outperform.

Hasbro (HAS) closed up more than +7% to lead gainers in the S&P 500 after Bank of America raised its price target on the stock to $90 from $85, citing the success of the company’s two latest digital game launches, Monopoly Go and Baldur’s Gate 3.

Moderna (MRNA) closed up more than +4% to lead gainers in the Nasdaq 100 as the company said its updated Covid-19 vaccine provides protection to new Covid mutations that have led to an increase in Covid hospitalizations in the U.S.  The updated vaccine is under FDA review and will be available within weeks if approved.

Lowe’s (LOW) closed up more than +3% after reporting Q2 comparable sales fell -1.6%, a smaller decline than the consensus of -2.57%. 

Medtronic Plc (MDT) is up more than +2% after raising its full-year adjusted EPS estimate to $5.08-$5.16 from a previous estimate of $5.00-$5.10, stronger than the consensus of $5.05.

PayPal Holdings (PYPL) closed up more than +2% after JPMorgan Chase raised its price target on the stock to $100 from $90.

Digital Realty Trust (DLR) closed up more than +2% after Citigroup raised its price target on the stock to $136 from $128.

Iron Mountain (IRM) closed up more than +1% after RBC Capital Markets upgraded the stock to outperform from sector perform with a price target of $68.

AppLovin (APP) closed up more than +1% after Jeffries upgraded the stock to buy from hold with a price target of $50.

Across the markets…

September 10-year T-notes (ZNU23) Tuesday closed little changed, down -0.5 of a tick, and the 10-year T-note yield fell -0.6 bp to 4.332%.  Sep T-notes Tuesday fell to a new 10-month nearest-futures low, and the 10-year T-note yield fell back from a nearly 16-year high of 4.362%.  T-notes are under pressure on   speculation that Fed Chair Powell will remain hawkish when he speaks Friday at the Fed’s annual symposium in Jackson Hole, Wyoming.  T-notes recovered nearly all of their losses after a slide in stocks boosted the safe-haven demand for T-notes.

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