Stocks Give Up Early Gains as Nvidia Weighs on Chip Stocks

The S&P 500 Index ($SPX) (SPY) Tuesday closed down -0.28%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.08%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.36%. 

Stock indexes Tuesday gave up an early advance and posted moderate losses.  Nvidia fell more than -2%, sparking a slide in chip stocks that weighed on the overall market.  Tuesday’s US economic news was mixed for stocks as new orders for capital goods rose more than expected in February, but the US consumer confidence index unexpectedly declined.

Stocks on Tuesday initially moved higher on some positive corporate news.  McCormick closed up more than +10% after reporting better-than-expected Q1 adjusted EPS.  Also, Seagate closed up more than +7% after Morgan Stanley upgraded the stock to overweight from equal weight.  In addition, Tesla closed up more than +2% after the Italian newspaper Il Sole 24 Ore reported Italy’s Industry Ministry contacted the company about the potential production of electric trucks. 

US Feb capital goods new orders nondefense ex-aircraft and parts, a proxy for corporate capital goods spending, rose +0.7% m/m, stronger than expectations of +0.1% m/m.

The US Jan S&P Core Logic composite-20 home price index rose +6.03% y/y, the largest increase in 14 months.

The March Conference Board US consumer confidence index unexpectedly fell -0.1 to a 4-month low of 104.7, weaker than expectations of an increase to 107.0.

The US Mar Richmond Fed manufacturing survey unexpectedly fell by -6 to -11, weaker than expectations of no change at -5.

The markets are discounting the chances for a -25 bp rate cut at 14% for the next FOMC meeting on April 30-May 1 and 78% for the following meeting on June 11-12.

Overseas stock markets Tuesday settled mixed.  The Euro Stoxx 50 climbed to a 23-year high and closed up +0.40%.  China's Shanghai Composite recovered from a 3-week low and closed up +0.17%.  Japan's Nikkei Stock Index closed down -0.04%.

Interest Rates

June 10-year T-notes (ZNM24) on Tuesday closed up +4 ticks.  The 10-year T-note yield fell -1.2 bp at 4.232%.  June T-note prices on Tuesday posted modest gains and recovered from early losses after strong demand for the Treasury’s 5-year T-note auction sparked some short covering in T-notes.  The $67 billion 5-year T-note auction was awarded at 4.235%, slightly lower than the 4.245% yield at the 1300 ET bidding deadline and a sign of strong demand.  T-notes also found support after the Conference Board’s US consumer confidence index unexpectedly declined.

On the negative side, the stronger-than-expected US Feb capital goods report and the increase in US home prices were hawkish factors for Fed policy and weighed on T-notes. 

European government bond yields on Tuesday moved lower.  The 10-year German bund yield fell -2.2 bp to 2.350%.  The 10-year UK gilt yield fell -1.7 bp to 3.971%.

The German Apr GfK consumer confidence index rose +1.4 to -27.4, stronger than expectations of -28.0.

ECB Governing Council member Muller said data over the coming weeks may be sufficient to confirm the slowdown in inflation by the time ECB policymakers set borrowing costs in June.

US Stock Movers

United Parcel Service (UPS) closed down more than -8% to lead losers in the S&P 500 after it forecast 2026 revenue that underwhelmed analysts, with Bank of America saying the company’s prior investor day meetings had set revenue targets that were higher than realized results.

International Paper (IP) closed down more than -6% after Sky News reported that the company wants to launch a formal offer for DS Smith. 

3M Co (MMM) closed down more than -2% to lead losers in the Dow Jones Industrials after the company’s agreement to pay service members with hearing loss $6 billion has garnered more than 99% participation by claimants who used 3M combat earplugs, surpassing the 98% threshold for finalizing the deal. 

Nvidia (NVDA) closed down more than -2% to drag chip stocks lower and weigh on the broader market.  GlobalFoundries (GFS) closed down -2%.  Meanwhile, Broadcom (AVGO), Texas Instruments (TXN), KLA Corp (KLAC), and Microchip Technology (MCHP) all closed down more than -1%. 

Rexford Industrial Realty (REXR) closed down more than -3% after announcing an offering of $840 million of shares via Bank of America and announcing plans to sell $500 million exchangeable senior notes due 2027 and $500 million exchangeable senior notes due 2029. 

Matador Resources (MTDR) closed down more than -5% after announcing it intends to offer $800 million of senior unsecured notes due 2032 in a private placement. 

CSX (CSX) closed down more than -1% after a container ship crashed into the Francis Scott Key Bridge in Baltimore, causing it to collapse and closing Consol Energy’s Baltimore Marine Terminal that CSX serves. 

Zoetis (ZTS) closed down more than -1% as the company faces an EU antitrust probe into concerns that it thwarted the market entry of a dog pain-relief treatment that could have rivaled its own. 

McCormick (MKC) closed up more than +10% to lead gainers in the S&P 500 after reporting Q1 adjusted EPS of 63 cents, stronger than the consensus of 57 cents. 

Seagate Technology Holdings (STX) closed up more than +7% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $115. 

Tesla (TSLA) closed up more than +2% after the Italian newspaper Il Sole 24 Ore reported Italy’s Industry Ministry contacted the company about the potential production of electric trucks. 

Krispy Kreme (DNUT) closed up more than +39% after announcing its doughnuts would be sold at McDonald’s restaurants across the US. 

Viking Therapeutics (VKTX) closed up more than +16% after announcing that results from its Phase 1 trial of an oral tablet formulation of VK2735 for obesity showed weight loss after 28 days.   

Praxis Precision Medicines (PRAX) closed up more than +23% after it reported that a mid-stage trial of its experimental treatment for patients with epilepsy showed that 100% of the patients achieved a complete response.

Chipotle Mexican Grill (CMG) closed up more than +1% after Bernstein raised its price target on the stock to $3,200 from $2,800.

Nasdaq (NDAQ) closed up more than +1% after Goldman Sachs upgraded the stock to buy from neutral with a price target of $73.

Earnings Reports (3/27/2024)

Carnival Corp (CCL), Chemours Co/The (CC), Cintas Corp (CTAS), Jefferies Financial Group Inc (JEF), and RH (RH).

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