Weakness in Tech Stocks Drags the Overall Market Lower

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Tuesday closed down -0.60%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.17%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.79%.

Stocks on Tuesday settled lower, with the Nasdaq 100 falling to a 2-week low.  Weakness in technology stocks weighed on the overall market as Nvidia fell more than -4%, leading chip stocks lower ahead of its Q4 earnings results on Wednesday.  Corporate news Tuesday was mixed for the overall market. 

On the negative side, Expeditors International of Washington closed down more than -6% after reporting below-consensus Q4 EPS. Also, Nvidia closed down more than -4% ahead of its fiscal Q4 earnings results due on Wednesday.  Tesla closed down more than -3% after Phillip Securities downgraded the stock to neutral from accumulate.

Tuesday’s U.S. economic news was bearish for stocks after Jan leading indicators fell -0.4% m/m, weaker than expectations of-0.3% m/m, and the fifteenth consecutive month that leading indicators have declined.

On the positive side, Discover Financial Services rallied more than +12% after Capital One Financial offered to acquire the company in an all-stock transaction valued at $35 billion.  Also, Walmart rose more than +3% after reporting above-consensus Q4 total U.S. comparable sales ex-gasoline.  Also, GlobalFoundries rose more than +2% as the U.S. plans to award $1.5 billion to the company under the Chips Act grant.

M&A activity is supportive of stocks. Capital One Financial announced the acquisition of Discover Financial Services in an all-stock transaction valued at $35 billion.  Also, Walmart announced that it will buy Vizio Holding for about $2.3 billion or $11.50 per share in cash.   

Increased stimulus from China may boost its growth and is positive for the global economy after Chinese lenders cut the five-year loan prime rate by 25 bp to 3.95%, a bigger cut than expectations of 10 bp to 4.10%. 

The markets are discounting the chances for a -25 bp rate cut at 11% for the March 19-20 FOMC meeting and 40% for the following meeting on April 30-May 1.

U.S. and European government bond yields on Tuesday moved lower.  The 10-year T-note yield fell -0.8 bp to 4.271%.  The 10-year German bund yield fell -3.8 bp to 2.373%.  The 10-year UK gilt yield fell -6.6 bp to 4.041%.   

Overseas stock markets on Tuesday settled mixed. The Euro Stoxx 50 closed down -0.06%. China’s Shanghai Composite closed up +0.42%.  Japan’s Nikkei Stock Index closed down -0.28%.

Today’s stock movers…

Expeditors International of Washington (EXPD) closed down more than -6% to lead losers in the S&P 500 after reporting Q4 EPS of $1.09, weaker than the consensus of $1.22.

Chip stocks retreated Tuesday and weighed on the overall market as Nvidia (NVDA) fell more than -4% ahead of its quarterly earnings results on Wednesday.  Also, Advanced Micro Devices (AMD) and Applied Materials (AMAT) closed down more than -5%.  Lam Research (LRCX) closed down more than -3%, and Marvell Technology (MRVL) and  ASML Holding NV (ASML) closed down more than -2%. 

Tesla (TSLA) closed down more than -3% after Phillip Securities downgraded the stock to neutral from accumulate.

Airbnb (ABNB) closed down more than -3% after Phillip Securities downgraded the stock to neutral from buy.

Caterpillar (CAT) closed down more than -2% to lead losers in the Dow Jones Industrials after Evercore ISI downgraded the stock to inline fork outperform. 

Global Payments (GPN) closed down more than -2% after announcing it intends to offer $1.75 billion in convertible senior notes due 2031. 

BorgWarner (BWA) closed down more than -1% after BNP Paribas Exane downgraded the stock to neutral from outperform. 

Discover Financial Services (DFS) closed up more than +12% to lead gainers in the S&P 500 after Capital One Financial acquired the company in an all-stock transaction valued at $35 billion. 

Walmart (WMT) closed up more than +3% to lead gainers in the Dow Jones Industrials after reporting Q4 total U.S. comparable sales ex-gasoline rose +3.9%, stronger than the consensus of +3.2%. 

Conagra Brands (CAG) closed up more than +4% after the company touted its healthy frozen meals and said it was well positioned from consumers increasingly using GLP-1 drugs for weight loss.

Intel (INTC) closed up more than +2% to lead gainers in the Nasdaq 100 after Bloomberg reported the company is in talks with the U.S. government for more than $10 billion in subsidies from the Chips and Science Act.

GlobalFoundries (GFS) closed up more than +2% as the U.S. plans to award $1.5 billion to the company under the Chips Act grant.

Coca-Cola (KO) closed up more than +2% after President and CFO Murphy said at a Consumer Analysts conference that he was confident his company would deliver at or above the high end of its long-term growth targets.

Vizio Holding (VZIO) closed up more than +16% after Walmart announced it would buy the company for about $2 billion or $11.50 per share in cash.   

Across the markets…

March 10-year T-notes (ZNH24) on Tuesday closed up by +6 ticks, and the 10-year T-note yield fell by -0.8 bp to 4.271%.  Mar T-notes on Tuesday posted moderate gains and garnered some safe-haven support from a decline in stocks.  Also, a rally in Canadian government bonds on Tuesday provided carryover support to T-notes after a softer-than-expected Canada Jan CPI report pushed Canadian government bonds higher.  Gains in T-notes were limited by supply pressures as nearly $50 billion of corporate bonds are expected to price this week, prompting bond dealers to short 10-year T-note futures to hedge against the upcoming supply.

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