Stocks Mixed as Chip Stock Weakness Weighs on the Nasdaq 100

The S&P 500 Index ($SPX) (SPY) today is up +0.17%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +1.01%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.57%.

Stock indexes today are mixed, with the Dow Jones Industrials climbing to a 1-month high and the Nasdaq 100 falling to a 1-week low.  An increase in M&A activity today provided support for stocks after Sonoco Products agreed to buy Eviosys from KPS Capital Partners for about $3.9 billion.  Also, RXO Inc. agreed to buy United Parcel Service’s asset-light freight brokerage business Coyote Logistics for more than $1 billion. 

Weakness in technology stocks is weighing on the Nasdaq 100 and the overall market today after Truist Advisory Services downgraded the technology sector to neutral from overweight, citing valuation concerns.

Dovish comments today from Chicago Fed President Goolsbee supported stocks when he said it might be appropriate for the Fed to start thinking about whether restrictive policy is putting too much pressure on the economy.

The US Jun Dallas Fed manufacturing outlook survey rose +4.3 to -15.1, slightly weaker than expectations of -15.0.

The markets are awaiting Friday’s release of the US May core PCE deflator, the Fed’s preferred inflation gauge, to see if price pressures are abating, which could pave the way for the Fed to begin cutting interest rates.  The consensus is that the May core PCE deflator eased to +2.6% y/y from +2.8% y/y in April.

The markets are discounting the chances for a -25 bp rate cut at 10% for the next FOMC meeting on July 30-31 and 64% for the following meeting on September 17-18.

Generally positive Q1 earnings results are supportive of stocks. Q1 earnings are expected to climb +7.1% y/y, well above the pre-earnings season estimate of +3.8%.  According to data compiled by Bloomberg Intelligence, about 81% of reporting S&P 500 companies have beaten Q1 earnings estimates. 

Overseas stock markets today are mixed.  The Euro Stoxx 50 rose to a 1-week high and is up +1.00%. China's Shanghai Composite fell to a 3-3/4 month low and closed down -1.17%.  Japan's Nikkei Stock 225 Index climbed to a 1-week high and closed up +0.54%.

Interest Rates

September 10-year T-notes (ZNU24) today are down -2 ticks.  The 10-year T-note yield is up +0.8 bp at 4.263%.  T-notes are under pressure today from carryover weakness in European government bonds.  Also, supply pressures are weighing on T-notes as the Treasury will auction $211 billion of T-notes and floating-rate notes this week, beginning with Tuesday’s $69 billion auction of 2-year T-notes.  T-notes 

recovered from their worst levels as short-covering emerged when Chicago Fed President Goolsbee said the Fed needs to be watchful of an overly tight monetary policy.

European government bond yields today are mixed.  The 10-year German bund yield is up +1.5 bp at 2.427%. The 10-year UK gilt yield is up +0.1 bp at 4.084%. 

The German Jun IFO business climate index unexpectedly fell -0.7 to 88.6 versus expectations of an increase of 89.6.

ECB Executive Board member Schnabel said the risk of new inflation jolts means "the ECB hasn't pre-committed to a fixed rate path" and remains data dependent.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 5% for the July 18 meeting and 66% for the September 12 meeting.

US Stock Movers

Weakness in chip stocks and AI hardware companies today are pressuring the broader market.  Super Micro Computer (SMCI) is down more than -6%.  Also, Nvidia (NVDA) is down more than -5% to lead losers in the Nasdaq 100.  In addition, Qualcomm (QCOM) and Marvell Technology (MRVL) are down more than -2%.  Finally, Applied Materials (AMAT), KLA Corp (KLAC), Lam Research (LRCX), and Intel (INTC) are down more than -1%.

Cryptocurrency-linked stocks are under pressure today, with the price of Bitcoin (^BTCUSD) down more than -4% at a 6-week low.  As a result, Coinbase Global (COIN), Marathon Digital (MARA), Riot Platforms (RIOT), and MicroStrategy (MSTR) are down more than -2%.   

Packaging Corp of America (PKG) is up more than +3% to lead gainers in the S&P 500 after data from Fastmarkets RISI showed containerboard prices were up $40 a ton in June.

Fertilizer producers are climbing today after China restricted fertilizer exports to contain domestic prices.  As a result, Mosaic (MOS) and CF Industries (CF) are up more than +3%.  Also, FMC Corp (FMC) is up more than +2%. 

International Business Machines (IBM) is up more than +2% to lead gainers in the Dow Jones Industrials after Goldman Sachs initiated coverage on the stock with a buy recommendation and a price target of $200. 

Target (TGT) is up more than +2% after announcing it will partner with Shopify to expand its marketplace for third-party merchants.

RXO Inc (RXO) is up more than +19% after agreeing to buy United Parcel Service’s asset-light freight brokerage business Coyote Logistics for over $1 billion.

Alnylam Pharmaceuticals  (ALNY) is up more than +35 after it said its heart drug vutrisiran succeeded in a late-stage study for patients with a serious heart condition known as AYYR amyloidosis with cardiomyopathy.

Carrier Global (CARR) is up more than +2% after Citigroup upgraded the stock to buy from neutral with a price target of $74.

Planet Fitness (PLNT) is up more than +1% after TD Cowen named the stock a top pick and upgraded it to buy from hold with a price target of $92. 

ResMed (RMD) is down more than -11% to lead losers in the S&P 500 after Citigroup downgraded the stock to neutral from buy and said Eli Lilly’s Tirzepatide is a viable alternative to breathing machines in treating obstructive sleep apnea.

Earnings Reports (6/24/2024)

Beyond Air Inc (XAIR), Eagle Pharmaceuticals Inc/DE (EGRX), Enerpac Tool Group Corp (EPAC), Luna Innovations Inc (LUNA).

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