Stocks Pressured by Apple and Chip Stocks

The S&P 500 Index ($SPX) (SPY) today is down by -0.19%, the Dow Jones Industrials Index ($DOWI) (DIA) is up by +0.40%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down by -0.92%.

Stocks today are mixed, with the Dow Jones Industrials posting a new record high.  Apple is down more than -3% today to weigh on the overall market on signs of weak demand for the new iPhone.  Also, the weakness in chip makers today is a drag on the broader market.  However, Intel is up more than +4% to lift the Dow Jones Industrials after the chipmaker officially qualified for as much as $3.5 billion in federal grants to make semiconductors for the Pentagon.

Today’s US economic news was hawkish for Fed policy after the Sep Empire manufacturing survey general business conditions index rose +16.2 to a 2-1/3 year high of 11.5, stronger than expectations of -4.0.

Corporate news today is mixed for stocks.  On the negative side, Apple is down more than -2% after TF International said weekend pre-order sales show demand for the company’s iPhone 16 Pro series is weaker than expected.  On the positive side, Oracle is up more than +4% after Melius Research upgraded the stock to buy.

This week, the market will focus on Tuesday’s US Aug retail sales report to see if consumer spending is holding up.  The consensus is that Aug retail sales will fall by -0.2% m/m but that Aug retail sales ex-autos will increase by +0.2% m/m.  The markets will also look to the 2-day FOMC meeting that begins Tuesday and whether policymakers will decide that a -25 bp cut in the fed funds target range would be adequate for a US economy that has shown signs of losing momentum or whether they will decide for a larger -50 bp rate cut instead.  Post-meeting comments from Fed Chair Powell on Wednesday will also be scrutinized regarding the Fed’s future policy intentions. 

The markets are discounting the chances at 100% for a -25 bp rate cut for the September 17-18 FOMC meeting and at 63% for a -50 bp rate cut at that meeting.

Signs of weakness in China’s economy are negative for global growth prospects.  China Aug industrial production rose +4.5% y/y, weaker than expectations of +4.7% y/y. Also, China Aug retail sales rose +2.1% y/y, weaker than expectations of +2.5% y/y.  In addition, China Aug new home prices fell -0.73% m/m, the largest decline in 9-3/4 years. 

Overseas stock markets today are lower.  The Euro Stoxx 50 is down -0.37%.  China's Shanghai Composite was closed for the Mid-autumn Festival holiday.  Japan's Nikkei Stock 225 was closed for the Respect-for-the-Aged Day holiday.

Interest Rates

December 10-year T-notes (ZNZ24) today are up +2 ticks.  The 10-year T-note yield is down -1.5 bp at 3.636%.  Dec T-notes today are slightly higher on heightened speculation the Fed will cut interest rates by -50 bp at this week’s 2-day FOMC meeting.   Swap markets showed the chances of a -50 bp rate cut rose to 63% today from 52% last Friday.  T-notes fell back from their best levels today after the US Sep Empire manufacturing survey general business conditions index rose more than expected to a 2-1/3 year high. Also, rising inflation expectations are negative for T-notes after the 10-year breakeven inflation rate rose to a 1-1/2 week high today of 2.100%. 

European government bond yields today are moving lower.  The 10-year German bund yield is down -2.7 bp at 2.121%.  The 10-year UK gilt yield is down -1.0 bp at 3.758%.

ECB Governing Council member Kazaks said, "There's still more risk inflation will be higher over the medium term than we expect," and the ECB "will almost surely need to wait until December for a clearer picture before making its next move" on interest rates.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 31% for the October 17 meeting.

US Stock Movers

Apple (AAPL) is down more than -3% to lead losers in the Dow Jones Industrials after TF International said demand for the company’s iPhone 16 Pro series is weak, with first-weekend pre-order sales of about 37 million units, down about -12.7% y/y from last year’s iPhone 15 series first-weekend sales.  Apple suppliers are falling as well, with Qorvo (QRVO) down more than -6% to lead losers in the S&P 500.  Also, Skyworks Solutions (SWKS) is down more than -6%.

Chip makers are under pressure today and are weighing on the broader market.  ARM Holdings Plc (ARM) is down more than -6% to lead losers in the Nasdaq 100.  Also, Micron Technology (MU) is down more than -4%, and Broadcom (AVGO) is down more than -3%.  In addition, KLA Corp (KLAC), Lam Research (LRCX), and ASML Holding NV are down more than -2%. Finally, Nvidia (NVDA), Marvell Technology (MRVL), GlobalFoundries (GFS), Applied Materials (AMAT), Microchip Technology (MCHP), and Texas Instruments (TXN) are down more than -1%. 

Intel (INTC) is up more than +4% to lead gainers in the Dow Jones Industrials and Nasdaq 100 after the chipmaker officially qualified for as much as $3.5 billion in federal grants to make semiconductors for the Pentagon. 

Oracle (ORCL) is up more than +4% after Melius Research upgraded the stock to buy from hold with a price target of $210.

Charles Schwab (SCHW) is up more than +3% after it reported new brokerage account in August rose +4% y/y to 324,000 and that it expects Q3 revenue will climb as much as 3% from Q2.

Elf Beauty (ELF) is down more than -3% after Piper Sandler cut its price target on the stock to $162 from $260.

MKS Instruments (MKSI) is down more than -3% after Citigroup downgraded the stock to neutral from buy. 

Nova Ltd (NVMI) is down more than -5% after Citigroup downgraded the stock to neutral from buy. 

Yelp Inc (YELP) is down more than -2% after Bank of America Global Research initiated coverage on the stock with a recommendation of underperform with a price target of $30. 

Exact Sciences (EXAS) is up more than +5% after releasing data from a study of its blood-based colon cancer screening that showed sensitivities of 88% for colorectal cancer and 31% for advanced precancerous lesions at 90% specificity. 

Nuvalent (NUVL) is up more than +23% after presenting updated data from two early-stage trials of its lead cancer programs that impressed analysts. 

Builders FirstSource (BLDR) is up more than +3% after Truist Securities upgraded the stock to buy from hold with a price target of $220. 

Zillow (ZG) is up more than +4% after Wedbush upgraded the stock to outperform from neutral with a price target of $80. 

Earnings Reports (9/16/2024)

None.

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