The S&P 500 Index ($SPX) (SPY) Thursday closed down -1.37%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -1.21% and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -2.44%.
US stocks on Thursday gave up an early advance and sold off sharply, with the Dow Jones Industrials falling to a 1-week low. US economic concerns hammered stocks after Thursday’s reports showed weekly jobless claims rose to a nearly 1-year high and manufacturing activity in July unexpectedly contracted by the most in 8 months. The weaker-than-expected US economic news sparked long liquidation in stocks due to fears that the Fed is behind the curve and waiting too long to cut interest rates.Â
The markets will look to Friday’s monthly payroll report for additional evidence the US economy is weakening. The consensus is for July nonfarm payrolls to increase by 175,000, slowing from June’s 206,000 increase, while the July unemployment report is expected to remain unchanged at 4.1%.
Stocks on Thursday initially moved higher, with the S&P 500 and Nasdaq 100 posting 1-week highs.  Favorable corporate earnings results were positive for stocks Thursday, as Meta Platforms rose more than +4% after reporting stronger-than-expected Q2 revenue. Also, CH Robinson Worldwide is up more than +14% after reporting better-than-expected Q2 EPS. Stock indexes also found support from a slide in the 10-year T-note yield to a 6-month low after Thursday’s Fed-friendly economic news bolstered the case for several Fed rate cuts this year.
US weekly initial unemployment claims rose +14,000 to a nearly 1-year high of 249,000, showing a weaker labor market than expectations of 236,000. Weekly continuing claims rose +33,000 to a 2-1/2 year high of 1.877 million, showing a weaker labor market than expectations of 1.855 million.
US Q2 nonfarm productivity rose +2.3%, stronger than expectations of +1.8%. Q2 unit labor costs rose +0.9%, weaker than expectations of +1.7%.
The US Jul ISM manufacturing index unexpectedly fell -1.7 to 46.88, weaker than expectations of an increase to 48.8 and the steepest pace of contraction in 8 months.
US Jun construction spending unexpectedly fell -0.3% m/m, weaker than expectations of an increase of +0.2% m/m.
Stock investors will continue to focus on tech stocks, with key earnings reports on tap. Magnificent 7 companies reporting this week include Apple (AAPL) and Amazon (AMZN) after Thursday’s close. Nvidia (NVDA) is expected to report earnings on August 28. Â
The market consensus is that Q2 earnings for the S&P 500 companies will rise +9% y/y. About one-third of the companies in the S&P 500 have reported thus far. According to Bloomberg, most reporting companies have beaten their earnings consensus, but only 43% have beaten revenue expectations, the lowest percentage in five years.
The markets are discounting the chances for a -25 bp rate cut at 100% for the September 17-18 FOMC meeting.
Overseas stock markets Thursday settled lower. The Euro Stoxx 50 closed down -2.20%. China's Shanghai Composite fell back from a 1-week high and closed down -0.22%. Japan's Nikkei Stock 225 closed down sharply by -2.49%.
Interest Rates
September 10-year T-notes (ZNU24) Thursday closed up by +29.5 ticks. The 10-year T-note yield fell -5.4 bp to 3.976%. Sep T-notes Thursday rallied to a fresh 6-month nearest-futures high, and the 10-year T-note yield fell to a 6-month low of 3.963%. T-note prices Thursday were underpinned by Wednesday’s comments from Fed Chair Powell, who said a Fed rate cut "could be" on the table at the September FOMC meeting. Also, an increase in safe-haven demand for T-notes due to rising geopolitical tensions in the Middle East is boosting prices after Iran was reported to have ordered a retaliatory strike against Israel for killing a Hamas leader in Iran. In addition, falling inflation expectations are bullish for T-notes after the US 10-year breakeven inflation rate fell to a 1-1/2 month low Thursday at 2.179%. T-notes added to their gains Thursday on Fed-friendly economic news that showed US weekly jobless claims rose to a nearly 1-year high and the Jul ISM manufacturing index unexpectedly contracted by the most in 8 months.
European government bond yields Thursday moved lower. The 10-year German bund yield fell to a 6-month low of 2.233% and finished down -6.0 bp at 2.244%. The 10-year UK gilt yield fell to a 6-month low of 3.853% and finished down -8.8 bp at 3.882%.
The Bank of England (BOE), in a 5-4 vote, cut its main benchmark interest rate by -25 bp to 5.00% from 5.25%, and BOE Governor Baily said the decision was "finely balanced" as "inflationary persistence had not yet conclusively dissipated, and there remained some upside risks to the outlook."
The Eurozone Jun unemployment rate unexpectedly rose +0.1 to 6.5%, showing a weaker labor market than expectations of no change at 6.4%.
The Eurozone Jul S&P manufacturing PMI was revised upward by +0.2 to 45.8 from the previously reported 45.6.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 97% for the September 12 meeting.
US Stock Movers
Moderna (MRNA) closed down more than -21% to lead losers in the S&P 500 and Nasdaq 100 after cutting its full-year revenue forecast to $3.0 billion-$3.5 billion from a prior forecast of about $4 billion, weaker than the consensus of $4.14 billion.Â
Western Digital (WDC)Â closed down more than -11% after forecasting Q1 revenue of $4.00 billion-$4.20 billion, weaker than the consensus of $4.24 billion.Â
ARM Holdings Plc (ARM) closed down more than -15% after forecasting Q2 revenue of $780 million-$830 million, the midpoint below the consensus of $806.2 million.
Lam Research (LRCX) closed down more than -9% to lead chip stocks lower after forecasting Q1 adjusted EPS of $7.25-$8.75, the midpoint below the consensus of $8.10. Other chip stocks retreated as well on the news, with Qualcomm (QCOM) closing down more than -9%, and Advanced Micro Devices (AMD) and ON Semiconductor (ON) closing down more than -8%. Also, Nvidia (NVDA), Applied Materials (AMAT), Micron Technology (MU), NXP Semiconductor NV (NXPI), and KLA Corp (KLAC) closed down more than -7%. In addition, Analog Devices (ADI), Intel (INTC), GlobalFoundries (GFS), Marvell Technology (MRVL), and Texas Instruments (TXN) closed down more than -5%.Â
Ingersoll Rand (IR) closed down more than -9% after cutting its full-year organic revenue estimate to 0% to up +2% from a previous estimate of +2% to +4%.Â
WESCO International (WCC) closed down more than -8% after reporting Q2 net sales of $5.48 billion, weaker than the consensus of $5.55 billion, and cutting its full-year sale forecast to -1.5% to +0.5% from a previous forecast of +1% to +4%.
Etsy (ETSY) closed down more than -7% after reporting Q2 EPS of 41 cents, weaker than the consensus of 45 cents, and forecasting a Q3 adjusted Ebitda margin of about 27%, weaker than the consensus of 28.9%.
Host Hotels & Resorts (HST) closed down more than -4% after cutting its AFFO/share guidance for the full year to $1.90-$1.98 from a previous view of $1.97-$2.05, weaker than the consensus of $2.02.
CH Robinson Worldwide (CHRW) closed up more than +14% to lead gainers in the S&P 500 after reporting Q2 EPS of $1.05, above the consensus of 96 cents.Â
FMC Corp (FMC) closed up more than +10% after reporting Q2 adjusted EPS of 63 cents, stronger than the consensus of 54 cents.
Kellanova (K) closed up more than +6% after reporting Q2 net sales of $3.19 billion, better than the consensus of $3.15 billion.
Meta Platforms (META) closed up more than +4% to lead gainers in the Nasdaq 100 after reporting Q2 revenue of $39.07 billion, stronger than the consensus of $38.34 billion.Â
Air Products & Chemicals (APD) closed up more than +8% after reporting Q3 adjusted EPS from continuing operations of $3.20, better than the consensus of $3.03.Â
Iron Mountain (IRM) closed up more than +6% after reporting Q2 revenue of $1.53 billion, above the consensus of $1.51 billion, and said it sees full-year revenue at the high end of $6.00 billion to $6.15 billion, above the consensus of $6.11 billion.
Aptiv Plc (APTV) closed up more than +5% after reporting Q2 adjusted EPS of $1.58, stronger than the consensus of $1.42, and announcing a $5 billion share buyback authorizations and $3 billion accelerated share repurchase authorization.Â
Exact Sciences (EXAS) closed up more than +27% after reporting Q2 adjusted Ebitda of $110.1 million, well above the consensus of $69.9 million, and raising its full-year adjusted Ebitda forecast to $335 million-$355 million from a previous forecast of $325 million-$350 million.Â
Earnings Reports (8/2/2024)
Ares Management Corp (ARES), Berry Global Group Inc (BERY), Brookfield Renewable Corp (BEPC), Cboe Global Markets Inc (CBOE), Chevron Corp (CVX), Church & Dwight Co Inc (CHD), Esab Corp (ESAB), Exxon Mobil Corp (XOM), Frontier Communications Parent (FYBR), Healthcare Realty Trust Inc (HR), Linde PLC (LIN), LyondellBasell Industries NV (LYB), Perrigo Co PLC (PRGO), PPL Corp (PPL), RBC Bearings Inc (RBC).
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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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