The S&P 500 Index ($SPX) (SPY) Wednesday closed down -0.16%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.09%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.20%.
Stocks on Wednesday settled mixed, with the S&P 500 posting a 2-1/2 week low and the Nasdaq 100 posting a 3-week low. Stocks on Wednesday initially recovered from early losses and moved higher after the 10-year T-note yield dropped to a 2-week low, which sparked some short covering in stocks after the US July JOLTS job openings fell more than expected to a 3-1/2 year low. The weak JOLTS report boosted hopes for the Fed to cut interest rates by 50 bp at the Sep 17-18 FOMC meeting.
However, stocks gave up their gains and turned mixed after the release of the Fed’s Beige Book Wednesday afternoon sparked growth concerns. The Fed Beige Book stated the number of Fed districts reporting flat or declining activity rose to nine in the month to August 26, up from five in the prior period, and that "employers were more selective with their hires and less likely to expand their workforces, citing concerns about demand and an uncertain economic outlook."
Stocks were also weighed down Wednesday on some negative corporate news, with the Nasdaq 100 posting a 3-week low. Dollar Tree sank more than -22% after reporting weaker-than-expected Q2 adjusted EPS and forecasting full-year adjusted EPS below consensus. Also, Zscaler plunged more than -18% after forecasting 2025 adjusted EPS well below consensus.
US MBA mortgage applications rose +1.6% in the week ended August 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 US Jul JOLTS job openings fell -237,000 to a 3-1/2 year low of 7.673 million, showing a weaker labor market than expectations of 8.100 million.
US July factory orders rose +5.0% m/m, stronger than expectations of +4.9% m/m and the largest increase in four years.
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. 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 44% for a -50 bp rate cut at that meeting.
Overseas stock markets Wednesday settled lower. The Euro Stoxx 50 dropped to a 2-week low and closed down -1.31%. 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) Wednesday closed up +18 ticks. The 10-year T-note yield fell -6.6 bp to 3.765%. Dec T-notes Wednesday extended Tuesday’s rally to a 2-week high, and the 10-year T-note yield fell to a 2-week low of 3.763%. T-notes rallied Wednesday, and yields fell after the US July JOLTS job opening fell more than expected to a 3-1/2 year low, a sign of labor market weakness that bolstered hopes the Fed may cut rates by 50 bp at the Sep 17-18 FOMC meeting. Also, a decline in inflation expectations supported T-note prices after today's 10-year breakeven inflation rate fell to a 2-week low of 2.055%. T-notes added to their gains Wednesday afternoon when the Fed Beige Book reported declining US economic activity, a dovish factor for Fed policy.
Supply pressures limited the upside in T-notes, with as many as 14 companies expected to issue debt Wednesday after 29 companies issued $43 billion of corporate debt on Tuesday, the third-largest amount ever.
European government bond yields Wednesday moved lower. The 10-year German bund yield fell to a 1-1/2 week low of 2.202% and finished down -5.2 bp at 2.224%. The 10-year UK gilt yield dropped to a 1-1/2 week low of 3.925% and finished down -5.5 bp at 3.935%.
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 99% for the September 12 meeting.
US Stock Movers
Dollar Tree (DLTR) closed down more than -22% 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.
Zscaler (ZS) closed down more than -18% after forecasting 2025 adjusted EPS of $2.81-$2.87, well below the consensus of $3.36.
Chip stock weakness on Wednesday weighed on the broader market. Intel (INTC) closed down more than -3% to lead losers in the Dow Jones Industrials. Also, ARM Holdings Plc (ARM) closed down more than -2%. In addition, Nvidia (NVDA) and GlobalFoundries (GFS) closed down more than -1%.
Energy stocks were under pressure Wednesday after the price of WTI crude fell to an 8-3/4 month low. As a result, APA Corp (APA) closed down more than -3%, and Schlumberger (SLB) and Phillips 66 (PSX) closed down more than -2%. Also, Chevron (CVX), ConocoPhillips (COP), Diamondback Energy (FANG), Exxon Mobil (XOM), Haliburton (HAL), Occidental Petroleum (OXY), Marathon Oil (MRO), and Valero Energy (VLO) closed down more than -1%.
Humana (HUM) closed up more than +2% after CFO Diamond said hospital inpatient admission rates have stabilized at the levels the company was seeing since late May.
Hormel Foods (HRL) closed down more than -6% 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.
Asana (ASAN) closed down more than -5% 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) closed down more than -4% after Barclays downgraded the stock to equal weight from overweight and cut its price target on the stock to $438 from $693
ASML Holding NV (ASML) closed down more than -4% after UBS downgraded the stock to neutral from buy.
Gitlab (GTLB) closed up more than +21% 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.
Nasdaq Inc (NDAQ) closed up more than +2% after Bank of America Global Research double-upgraded the stock to buy from underperform with a price target of $90.
Astera Labs (ALAB) closed up more than +6% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $55.
Boyd Gaming (BYD) closed up more than +3% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $74.
Ball Corp (BALL) closed up more than +1% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $78.
Sweetgreen (SG) closed up more than +1% after TD Cowen upgraded the stock to buy from hold with a price target of $43.
American Tower (AMT) closed up nearly +1% after S&P Global Ratings upgraded the company’s long-term debt rating to BBB from BBB-.
Earnings Reports (9/5/2024)
Broadcom Inc (AVGO), DocuSign Inc (DOCU), Guidewire Software Inc (GWRE), Science Applications International (SAIC), Smartsheet Inc (SMAR), Toro Co/The (TTC), UiPath Inc (PATH).
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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.
