The S&P 500 Index ($SPX) (SPY) Thursday closed down by -0.17%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down by -0.44%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down by -0.05%.
Stocks fell moderately on Thursday, with the Dow Jones Industrials dropping to a 2-week low. The prospect of escalating conflict in the Middle East has dampened the appetite for risk assets and is weighing on stocks. Tensions mounted after Israeli warplanes attacked Beirut when eight Israeli soldiers were killed in southern Lebanon in battles against Hezbollah. The markets are awaiting Israel’s response to Tuesday’s missile barrage from Iran after Israeli Prime Minister Netanyahu vowed to retaliate, saying Iran “made a big mistake” and “will pay.”
Stocks recovered from their worst levels Thursday as soft-landing prospects improved after the Sep ISM services index climbed to a 19-month high. Also, energy stocks rallied after WTI crude oil jumped more than +5% to a 1-month high.
US weekly initial unemployment claims rose +6,000 to 225,000, showing a slightly weaker labor market than expectations of 221,000.
The US Sep ISM services index rose +3.4 to 54.9, stronger than expectations of 51.7 and the fastest pace of expansion in 19 months.
US Aug factory orders unexpectedly fell -0.2% m/m, weaker than expectations of +0.1% m/m.
Dovish comments Thursday from Chicago Fed President Goolsbee were supportive for stocks when he said, "Interest rates need to come down by a lot over the next 12 months as inflation is coming down and is close to target, and unemployment has come up and the job market is basically where we would want it to be."
The markets are looking ahead to Friday's monthly US payroll report for market direction. Sep nonfarm payrolls are expected to climb +150,000, and the Sep unemployment rate is expected to remain unchanged at 4.2%.
The markets are discounting the chances at 100% for a -25 bp rate cut at the November 6-7 FOMC meeting and at 35% for a -50 bp rate cut at that meeting.
Overseas stock markets Thursday settled mixed. The Euro Stoxx 50 fell to a 1-week low and closed down by -0.85%. China's Shanghai Composite is closed for the week-long National Day holiday. Japan's Nikkei Stock 225 closed up by +1.97%.
Interest Rates
December 10-year T-notes (ZNZ24) Thursday closed down by -16.5 ticks. The 10-year T-note yield rose +6.3 bp to 3.844%. Dec T-notes Thursday tumbled to a 1-month low, and the 10-year T-note yield rose to a 1-month high of 3.850%. An increase in inflation expectations weighed on T-notes after the 10-year breakeven inflation rate rose to a 2-month high Thursday at 2.238%. T-notes added to their losses Thursday after the US Sep ISM services index rose more than expected to a 19-month high, a hawkish factor for Fed policy that dampened the chances of a 50 bp rate cut at the next FOMC meeting.
Losses in T-notes were limited after US weekly initial unemployment claims rose more than expected, a dovish factor for Fed policy. Also, heightened geopolitical risks in the Middle East still support safe-haven demand for T-notes.
European government bond yields Thursday were mixed. The 10-year German bund yield rose +5.2 bp to 2.144%. The 10-year UK gilt yield fell -0.9 bp to 4.016%.
The Eurozone Sep S&P composite PMI was revised upward by +0.7 to 49.6 from the previously reported 48.9.
Eurozone Aug PPI fell -2.3% y/y, right on expectations.
Bank of England (BOE) Governor Bailey said the BOE could become a "bit more aggressive" and "a bit more activist" in its approach to cutting interest rates if the news on inflation continued to be good.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 95% for the October 17 meeting.
US Stock Movers
Constellation Brands (STZ) closed down more than -4% to lead losers in the S&P 500 after reporting Q2 comparable net sales of $2.92 billion, below the consensus of $2.93 billion.
Tesla (TSLA) closed down more than -3%, adding to Wednesday’s -3% loss, to lead losers in the Nasdaq 100 after reporting weaker-than-expected Q3 vehicle deliveries.
Stellantis NV (STLA) closed down more than -3% after Barclays downgraded the stock to equal weight from overweight.
Levi Strauss (LEVI) closed down more than -7% after reporting Q3 net revenue of $1.52 billion, below the consensus of $1.55 billion, and cut its full-year net revenue forecast to up +1% from a previous forecast of +1% to +3%.
Automotive semiconductor makers are under pressure after Bloomberg Intelligence said automotive semiconductor makers could face bigger downgrades than the market anticipates as the electric vehicle sector may enter a deeper downturn. As a result, STMicroelectronics NV (STM), ON Semiconductor Corp (ON), and NXP Semiconductors NV (NXPI) closed down more than -1%.
Tractor Supply (TSCO) closed down more than -2% after Evercore ISI downgraded the stock to in-line from outperform.
Hims & Hers Health (HIMS) closed down more than -9% after the FDA said Eli Lilly’s weight-loss drugs are no longer considered to be in shortage in the US, which threatens to undercut sales at Hims who was selling compounded semaglutide to treat obesity.
Wolfspeed (WOLF) closed down more than -5% after Mizuho Securities downgraded the stock to underperform from neutral with a price target of $8.
Nvidia (NVDA) closed up more than +3% after CEO Huang said demand for the company’s new Blackwell chips is “insane.”
MarketAxess Holdings (MKTX) closed up more than +7% to lead gainers in the S&P 500 after reporting total average daily volume on its electronic trading platform in September surged +52.5% y/y.
Uranium and nuclear energy stocks are climbing today after Nikkei reported that Alphabet is considering using a carbon-free source for its power needs. As a result, Vistra (VST) closed up more than +5%, and Constellation Energy (CEG) closed up more than +4% to lead gainers in the Nasdaq 100.
Energy stocks rallied Thursday after WTI crude oil soared more than +5% to a 1-month high. As a result, Valero Energy (VLO) closed up more than +6%, and Marathon Petroleum (MPC) closed up more than +5%. Also, Diamondback Energy (FANG), Phillips 66 (PSX), and Devon Energy (DVN) closed up more than +3%. In addition, Haliburton (HAL), Marathon Oil (MRO), Occidental Petroleum (OXY), Schlumberger (SLB), and APA Corp (APA) closed up more than +2%.
Southwest Airlines (LUV) closed up more than +3% after Citigroup raised its price target on the stock to $31.50 from $28.25.
Northern Oil & Gas (NOG) closed up more than +6% after Jeffries initiated coverage on the stock with a buy recommendation and a price target of $53.
Wolverine World Wide (WWW) closed up more than +5% after BNP Paribas Exane upgraded the stock to outperform from neutral with a price target of $22.
Accenture Plc (ACN) closed up more than +1% after announcing a partnership with Nvidia to create a unit that helps clients use generative AI.
Earnings Reports (10/4/2024)
Apogee Enterprises Inc (APOG), Golden Matrix Group Inc (GMGI), Park Aerospace Corp (PKE), and Village Super Market Inc (VLGEA).
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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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