Stocks Mostly Lower as Chipmakers Remain Under Pressure

The S&P 500 Index ($SPX) (SPY) today is down -0.14%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.28%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.56%.

Stocks today are mostly lower, with the Nasdaq 100 posting a 3-week low.  Chip stocks today added to Tuesday’s sharp losses to drag the broader market lower. Stocks also slid after the US July trade deficit widened to a 2-year high, a negative factor for Q3 GDP. 

US MBA mortgage applications rose +1.6% in the week ended Aug 30, with the purchase mortgage sub-index up +3.3% and the refinancing mortgage sub-index down -0.3%.  The average 30-year fixed rate mortgage fell -1 bp to a 16-month low of 6.43% from 6.44% in the prior week. 

The US July trade deficit widened to -$78.8 billion from -$73.0 billion in June, the largest deficit in 2 years and a negative factor for Q3 GDP.

The financial markets are awaiting fresh US economic news this week that will offer insight into the health of the US economy and help determine the path of the Fed’s interest rate policy.  Later this morning, the July JOLTS job openings report is expected to show a decline of -184,000 to 8.1 million, a negative sign for the US labor market.  On Thursday, the Aug ISM services index is expected to ease to 51.2 from 51.4 in July. Also, Friday’s monthly payroll report is expected to show Aug nonfarm payrolls rose +165,000 from +114,000 in July, and the Aug unemployment rate is expected to ease to 4.2% from 4.3% in July.

The markets are discounting the chances at 100% for a -25 bp rate cut for the September 17-18 FOMC meeting and at 38% for a -50 bp rate cut at that meeting.

Overseas stock markets today are lower.  The Euro Stoxx 50 dropped to a 2-week low and is down -1.37%. China's Shanghai Composite fell to a 6-3/4 month low and closed down -0.67%.  Japan's Nikkei Stock 225 plunged to a 2-1/2 week low and closed down sharply by -4.24%.

Interest Rates

December 10-year T-notes (ZNZ24) today are up +3 ticks.  The 10-year T-note yield is down -0.8 bp at 3.823%.  Dec T-notes today extended Tuesday’s rally and posted a 1-week high.  Today’s slump in global equity markets has fueled safe-haven demand for T-notes.  Also, a decline in inflation expectations is supporting T-note prices after the 10-year breakeven inflation rate today fell to a 1-1/2 week low of 2.087%.  Supply pressures are limiting the upside in T-notes, with as many as 14 companies expected to issue debt today after 29 companies issued $43 billion of corporate debt on Tuesday, the third-largest amount ever. 

European government bond yields today are moving lower.  The 10-year German bund yield fell to a 1-week low of 2.219% and is down -4.9 bp at 2.228%.  The 10-year UK gilt yield dropped to a 1-1/2 week low of 3.942% and is down -3.6 bp at 3.954%.

The Eurozone Aug S&P composite PMI was revised down by -0.2 to 51.0 from the previously reported 51.2.

The Eurozone July PPI fell -2.1% y/y, the fifteenth consecutive month that producer prices have fallen year-over-year.

ECB Executive Board member Cipollone said the ECB shouldn't keep interest rates too high for too long as doing so could damage the economy.

ECB Governing Council member Kazaks said, "Interest rates have to go lower because the biggest part of the inflation problem has been solved. The discussion is only about how quickly and how strongly."

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 100% for the September 12 meeting.

US Stock Movers

Chip stocks today are weaker and are extending Tuesday’s losses. Nvidia (NVDA) is down more than -1% after Bloomberg News reported that the US Justice Department sent subpoenas to the company, along with other chipmakers, as it sought evidence the companies violated antitrust laws.  Also, ASML Holding NV (ASML) is down more than -4% after UBS downgraded the stock to neutral from buy.  In addition, Intel (INTC), KLA Corp (KLAC), Marvell Technology (MRVL), NXP Semiconductors (NXPI), Broadcom (AVGO), Applied Materials (AMAT), and Lam Research (LRCX) are down more than -1%. 

Dollar Tree (DLTR) is down more than -20% to lead losers in the S&P 500 and Nasdaq 100 after reporting Q2 adjusted EPS of 67 cents, weaker than the consensus of $1.05, and forecasting full-year adjusted EPS of $5.20-$5.60, well below the consensus of $6.57. 

Hormel Foods (HRL) is down more than -9% after reporting Q3 net sales of $2.90 billion, weaker than the consensus of $2.95 billion, and cutting its full-year net sales estimate to $11.8 billion-$12.1 billion from a previous view of $12.2 billion-$12.5 billion. 

Zscaler (ZS) is down more than -17% after forecasting 2025 adjusted EPS of $2.81-$2.87, well below the consensus of $3.36. 

Asana (ASAN) is down more than -12% after reporting a Q2 adjusted loss per share of -5 cents versus a loss of -4.0 cents y/y, and RBC Capital Markets said it was “a rough quarter,” as “billings missed consensus, and net retention rates contracted further.”

Super Micro Computer (SMCI) is down more than -6% after Barclays downgraded the stock to equal weight from overweight and cut its price target on the stock to $438 from $693

Amphenol (APH) is down more than -3% after Bank of America downgraded the stock to neutral from buy.

Gitlab (GTLB) is up more than +15% after reporting Q2 revenue of $182.6 million, above the consensus of $177.2 million, and raising its 2025 revenue forecast to $742 million-$744 million from a previous forecast of $733 million-$737 million, stronger than the consensus of $$735.7 million. 

Sweetgreen (SG) is up more than +6% after TD Cowen upgraded the stock to buy from hold with a price target of $43.

Nasdaq Inc (NDAQ) is up more than +2% to lead gainers in the S&P 500 after Bank of America Global Research double upgraded the stock to buy from underperform with a price target of $90.

American Tower (AMT) is up more than +2% after S&P Global Ratings upgraded the company’s long-term debt rating to BBB from BBB-.

Astera Labs (ALAB) is up more than +2% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $55. 

Ball Corp (BALL) is up more than +2% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $78. 

Boyd Gaming (BYD) is up more than +2% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $74.

Earnings Reports (9/4/2024)

Casey's General Stores Inc (CASY), Ciena Corp (CIEN), Copart Inc (CPRT), Core & Main Inc (CNM), Dick's Sporting Goods Inc (DKS), Dollar Tree Inc (DLTR), Hewlett Packard Enterprise Co (HPE), Hormel Foods Corp (HRL).

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