Tech Stocks Lower Despite Dovish Payroll Report

The S&P 500 Index ($SPX) (SPY) today is up +0.07%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.47%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.63%.

Stocks are mixed today, with the Nasdaq 100 falling to a 3-1/2 week low.  Weakness in chip stocks is weighing on Nasdaq 100 today, led by a -9% fall in Broadcom after it gave disappointing guidance on Q4 revenue.  Also, weakness in the US labor market is a negative factor for the economy after US Aug nonfarm payrolls rose less than expected and July payrolls were revised lower.  However, stocks found support as the weak payroll report knocked the 10-year T-note yield down to a 15-month low and boosted the chances for a 50 bp Fed rate cut at the Sep 17-18 FOMC meeting to 56% from 38% before the report. 

US Aug nonfarm payrolls rose +142,000, weaker than expectations of +165,000.  Also, July nonfarm payrolls were revised lower to +89,000 from the previously reported +114,000.  The Aug unemployment rate fell -0.1 to 4.2%, right on expectations.

US Aug average hourly earnings rose +0.4% m/m and +3.8% y/y, slightly stronger than expectations of +0.3% m/m and +3.7% y/y.

Dovish comments today from New York Fed President Williams were supportive of stocks when he said, "With the economy now in equipoise and inflation on a path to 2%, it is now appropriate to dial down the degree of restrictiveness in the stance of policy by reducing the target range for the federal funds rate."

The markets are discounting the chances at 100% for a -25 bp rate cut for the September 17-18 FOMC meeting and at 56% for a -50 bp rate cut at that meeting.

Overseas stock markets today are mixed.  The Euro Stoxx 50 recovered from a 3-week low and is up +0.09%.  China's Shanghai Composite fell to a 7-month low and closed down -0.81%.  Japan's Nikkei Stock 225 fell to a 3-week low and closed down by -0.72%.

Interest Rates

December 10-year T-notes (ZNZ24) today are up +2 ticks.  The 10-year T-note yield is down -0.6 bp at 3.721%.  Dec T-notes today climbed to a 1-month high, and the 10-year T-note yield fell to a 15-month low of 3.652%.  T-note prices today are slightly higher after US Aug nonfarm payrolls rose less than expected and July payrolls were revised lower, dovish factors for Fed policy.  Gains in T-notes were muted by signs of wage pressures after US Aug average hourly earnings rose more than expected, a hawkish factor for Fed policy.

European government bond yields today are lower.  The 10-year German bund yield dropped to a 1-month low of 2.148% and is down -0.9 bp at 2.199%.  The 10-year UK gilt yield fell to a 3-week low of 3.847% and is down -0.4 bp at 3.911%.

Eurozone Q2 GDP was revised lower to +0.2% q/q from the previously reported +0.3% q/q.

German July industrial production fell -2.4% m/m, weaker than expectations of -0.5% m/m.

France July industrial production fell -0.5% m/m, weaker than expectations of -0.3% m/m.

German trade data was better than expected after July exports rose +1.7% m/m, stronger than expectations of +1.1% m/m.  Also, July imports rose +5.4% m/m, stronger than expectations of +0.7% m/m and the most in 3-1/4 years.

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 are under pressure today, led by -9% fall in Broadcom (AVGO) after forecasting Q4 revenue of $14.0 billion, weaker than the consensus of $14.13 billion.  Also, ARM Holdings Plc (ARM) and Marvell Technology (MRVL) are down more than -2%.  In addition, Nvidia (NVDA), Advanced Micro Devices (AMD), Qualcomm (QCOM), Applied Materials (AMAT), NXP Semiconductors NV (NXPI), Lam Research (LRCX), KLA Corp (KLAC), and Micron Technology (MU) are down more than -1%. 

Super Micro Computer (SMCI) is down more than -5% after JPMorgan Chase downgraded the stock to neutral from overweight. 

Mobileye (MBLY) is down more than -8% after Bloomberg reported that Intel was considering offloading some of its 88% stake in the company on the public market or via a sale to a third party. 

AvalonBay Communities (AVB) is down more than -2% after offering 3.2 million shares via Deutsche Bank, Bank of America Securities, Morgan Stanley, and Goldman Sachs.

Organon & Co (OGN) is down more than -1% after JPMorgan Chase downgraded the stock to underweight with a price target of $20. 

Home builders are climbing today after the 10-year T-note yield fell to a 15-month low, a supportive factor for housing demand.  As a result, Builders FirstSource (BLDR) is up more than +3% to lead gainers in the S&P 500.  Also, PulteGroup (PHM), Lennar (LEN), DR Horton (DHI), and Toll Brothers (TOL) rose more than +2%.

UiPath (PATH) is up more than +7% after reporting Q2 revenue of $316.3 million, better than the consensus of $303.9 million, and forecast 2025 revenue of $1.42 billion-$1.43 billion, stronger than the consensus of $1.41 billion.

Carrier Global (CARR) is up more than +2% after Wolfe Research upgraded the stock to peer perform from underperform.

Smartsheeet (SMAR) is up more than +8% after reporting Q2 adjusted EPS of 44 cents, stronger than the consensus of 30 cents, and raising its 2025 adjusted EPS forecast to $1.36-$1.39 from a previous estimate of $1.22-$1.29, better than the consensus of $1.26. 

Samsara (IOT) is up more than +15% after reporting Q2 revenue of $300.2 million, above the consensus of $289.6 million, and raising its 2025 revenue forecast to $1.22 billion-$1.23 billion from a previous estimate of $1.21 billion. 

Guidewire Software (GWRE) is up more than +13% after reporting Q4 revenue of $291.5 million, better than the consensus of $284 million, and forecasting Q1 revenue of $251 million-$257 million, well above the consensus of $236.1 million. 

US Steel (X) is up more than +6% after Cleveland-Cliff’s CEO Gonclaves said he’s still in the market for US Steel’s assets.

Earnings Reports (9/6/2024)

ABM Industries Inc (ABM), Compass Minerals International (CMP), Genesco Inc (GCO), Golden Matrix Group Inc (GMGI), National Beverage Corp (FIZZ), RH (RH).

• Is Zoetis Stock Underperforming the Dow?
• Is Adobe Stock Outperforming the Dow?
• Is Cadence Design Stock Underperforming the Nasdaq?
• DocuSign (DOCU): Priced-In Optimism Doesn’t Preclude Making Money