What you need to know…
The S&P 500 Index ($SPX) (SPY) Thursday closed down -1.35%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -1.08%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -2.19%.
Stocks on Thursday gave up a morning rally and sold off, with the Dow Jones Industrials falling to a 6-week low. A sell-off in mega-cap technology stock weighed on the overall market. Also, stronger-than-expected U.S. economic news and hawkish Fed comments pushed bond yields higher and sparked long liquidation in stocks ahead of Friday’s speech by Fed Chair Powell.
Stock indexes Thursday morning initially opened higher after Nvidia climbed to a record high and sparked a rally in technology stocks when it reported stronger-than-expected Q2 revenue and forecast Q3 sales well above expectations.
The markets await comments Friday morning from Fed Chair Powell at the Fed’s annual symposium of global central bankers at Jackson Hole, Wyoming. With inflation falling from 40-year highs but still well above the Fed’s 2% target, Powell’s speech will be scoured to determine when the Fed may end its rate hike campaign. ECB President Lagarde will also speak at the event.
Former St. Louis Fed President Bullard said a pickup in economic activity this summer could delay plans for the Fed to end its interest-rate hiking campaign, saying, "This reacceleration could put upward pressure on inflation, stem the disinflation that we're seeing and instead delay plans for the Fed to change policy."
Boston Fed President Collins said it will take time to get inflation to the Fed's 2% goal, and "we may need additional incremental hikes, and we may be very near a place where we can hold rates at restrictive levels for some time."
Philadelphia Fed President Harker thinks policymakers have likely undertaken sufficient tightening and that the Fed has "probably done enough," and he sees interest rates on hold for the rest of the year.
U.S. weekly initial unemployment claims unexpectedly fell -10,000 to 230,000, showing a stronger labor market than expectations of an increase to 240,000.
U.S. July capital goods new orders nondefense ex-aircraft and parts unexpectedly rose +0.1% m/m, right on expectations.
The U.S. July Chicago Fed national activity index rose +0.45 to 0.12, stronger than expectations of -0.22.
The markets are discounting the odds at 72% for a +25 bp rate hike at the September 20 FOMC meeting and 53% for that +25 bp rate hike at the November 1 FOMC meeting.
Global bond yields Thursday were mixed. The 10-year T-note yield rose +4.1 bp to 4.233%. The 10-year German bund yield fell to a 2-week low of 2.447% and is finished down -0.4 bp at 2.513%. The 10-year UK gilt yield fell to a 2-week low of 4.390% and finished down -4.2 bp at 4.426%.
Overseas stock markets Thursday settled mixed. The Euro Stoxx 50 closed down -0.81%. China’s Shanghai Composite Index closed up +0.12%. Japan’s Nikkei Stock Index closed up +0.87%.
Today’s stock movers…
Dollar Tree (DLTR) closed down more than -12% to lead losers in the S&P 500 and Nasdaq 100 after forecasting Q3 EPS of 94 cents to $1.04, weaker than the consensus of $1.29.
A slump in mega-cap technology stocks Thursday weighed on the overall market. Netflix (NFLX) closed down more than -4%. Also, Apple (AAPL), Amazon.com (AMZN), Alphabet (GOOGL), Meta Platforms (META), Microsoft (MSFT), and Tesla (TSLA) closed down more than -2%.
Boeing (BA) closed down more than -4% to lead losers in the Dow Jones Industrials after it reported an issue affecting its 737 Max jet, raising concerns about its delivery target.
Higher bond yields Thursday weighed on chip stocks. As a result, Advanced Micro Devices (AMD) closed down more than -6%, and Intel (INTC) closed down more than -4%. Also, KLA Corp (KLAC), Applied Materials (AMAT), NXP Semiconductors NV (NXPI), Microchip Technology (MCHP), ON Semiconductor (ON), and Lam Research (LRCX) closed down more than -3%. In addition, Qualcomm (QCOM), Western Digital (WDC), Texas Instruments (TXN), and Micron Technology (MU) closed down more than -2%.
Petco (WOOF) closed down more than -20% after forecasting 2024 net revenue of $6.15 billion-$6.28 billion, below the consensus of $6.29 billion.
Medtronic Plc (MDT) closed down more than -3% after saying the FDA’s independent experts panel voted against recommending the company’s blood pressure treatment device, saying the risks do not outweigh the benefits.
U.S. Steel (X) closed down more than -2% after Esmark said it’s no longer pursuing a takeover of the company.
Prudential Financial (PRU) closed up more than +2% after Raymond James upgraded the stock to a “strong buy” with a price target of $125.
Regional bank stocks rose Thursday as they recovered some of this week’s losses. Zions Bancorp (ZION), Truist Financial (TFC), Fifth Third Bancorp (FITB), and KeyCorp (KEY) closed up more than +1%. Also, Comerica (CMA), Citizens Financial Group (CFG), and Huntington Bancshares (HBAN) closed up more than +0.5%.
Autodesk (ADSK) closed up more than +2% to lead gainers in the Nasdaq 100 after reporting Q2 net revenue of $1.35 billion, above the consensus of $1.32 billion, and raising its 2024 revenue forecast to $5.41 billion-$5.46 billion from a previous forecast of $5.36 billion-$5.46 billion, stronger than the consensus of $5.41 billion.
Guess? Inc (GES) closed up more than +25% after reporting Q2 gross margin of 44.2%, better than the consensus of 41.1%, and raising its 2024 adjusted operating margin forecast to 9.0%-9.4% from a prior view of 8.2%-8.8%.
Splunk (SPLK) closed up more than +12% after reporting Q2 revenue of $910.6 million, above the consensus of $886.9 million, and raising its 2024 revenue forecast to $3.93 billion-$3.95 billion from a previous forecast of $3.85 billion-$3.90 billion, stronger than the consensus of $3.90 billion.
Discover Financial Services (DFS) closed up +0.62% after Wolfe Research upgraded the stock to outperform from peer perform with a price target of $104.
Across the markets…
September 10-year T-notes (ZNU23) Thursday closed down -10 ticks, and the 10-year T-note yield rose +4.1 bp to 4.233%. Sep T-notes Thursday posted moderate losses and were under pressure after U.S. weekly jobless claims unexpectedly declined, which signals a stronger labor market that is hawkish for Fed policy. Hawkish Fed comments Thursday from Boston Fed President Collins and former St. Louis Fed President Bullard also weighed on T-notes when they said we may need more rate hikes to control inflation. The sell-off in stocks Thursday boosted some safe-haven demand for government debt and limited losses in T-notes.
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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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