Stock Indexes Turn Lower as Chip Makers and Energy Stocks Fall

The S&P 500 Index ($SPX) (SPY) today is down by -0.34%, the Dow Jones Industrials Index ($DOWI) (DIA) is down by -0.31%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down by -1.02%.

Stocks today are moderately lower.  Chip stocks are retreating today to weigh on the broader market after Bloomberg reported that the Biden administration is discussing capping sales of advanced AI chips on a country-specific basis.  Chip stocks extended their losses today when ASML Holding NV plunged after reporting weaker-than-expected Q3 bookings.  Energy stocks are also under pressure today, with the price of WTI crude oil plunging more than -4% to a 2-week low after the Washington Post reported that Israeli Prime Minister Netanyahu told the Biden administration he is willing to strike military rather than oil or nuclear facilities in Iran.  In addition, managed healthcare stocks are moving lower today after UnitedHealth Group cut its full-year adjusted EPS forecast.

Stock indexes have support on solid corporate earnings results from Citigroup, Goldman Sachs, and Bank of America.  Also, Walgreens Boots Alliance and Charles Schwab are moving higher on strong earnings results.

The US Oct Empire manufacturing survey general business conditions fell -23.6 to a 5-month low of -11.9, weaker than expectations of 3.6.

Middle East tensions continue to be a negative factor for stocks.  In addition to Gaza, Israel is waging a ground and air offensive in Lebanon to combat Hezbollah.  The Israel Defense Force (IDF) deployed a fourth division of troops in southern Lebanon while maintaining airstrikes in Beirut’s southern suburbs.  The markets are also awaiting Israel’s response to the October 1 missile barrage from Iran.

The results of corporate Q3 earnings may determine the near-term direction of stocks.  According to Bloomberg Intelligence, companies in the S&P 500 are expected to report an average +4.3% increase in quarterly earnings in Q3 from a year ago, down from +7.9% growth projected in July.

The markets are discounting the chances at 92% for a -25 bp rate cut at the November 6-7 FOMC meeting and at 0% for a -50 bp rate cut at that meeting.

Overseas stock markets today are mixed.  The Euro Stoxx 50 fell from a 2-week high and is down by -1.65%. China's Shanghai Composite closed down by -2.53%.   Japan's Nikkei Stock 225 climbed to a 2-3/4 month high and closed up by +0.77%.

Interest Rates

December 10-year T-notes (ZNZ24) today are up by +18 ticks.  The 10-year T-note yield is down by -6.1 bp to 4.040%. Dec T-notes today are moderately higher on carryover support from a rally in 10-year German bunds to a 1-week high. Also, today’s -4% plunge in crude oil prices has lowered inflation expectations, a bullish factor for T-notes.  T-notes added to their gains after the Oct Empire manufacturing survey general business conditions fell more than expected to a 5-month low.

European government bond yields today are moving lower.  The 10-year German bund yield dropped to a 1-week low of 2.219% and is down -5.0 bp to 2.225%.  The 10-year UK gilt yield is down by -6.8 bp to 4.170%.

Eurozone Aug industrial production rose +1.8% m/m, right on expectations and the largest increase in 1-1/2 years.

The German Oct ZEW survey expectations of economic growth rose +9.5 to 13.1, stronger than expectations of 10.0.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 96% for Thursday’s meeting.

US Stock Movers

ASML Holding NV (ASML) is down more than -13% to lead losers in the Nasdaq 100 after reporting Q3 bookings of 2.63 billion euros, well below the consensus of 5.39 billion euros.

Chip stocks are falling today after Bloomberg reported that the Biden administration is discussing capping sales of advanced AI chips on a country specific basis.  As a result, KLA Corp (KLAC) is down more than -8% to lead losers in the S&P 500, and Applied Materials (AMAT) is down more than -7%.  Also, ARM Holdings Plc (ARM) and Lam Research (LRCX) are down more than -6%.  In addition, Nvidia (NVDA) and Advanced Micro Devices (AMD) are down more than -4%, and Micron Technology (MU) is down more than -3%.  Finally, Intel (INTC), NXP Semiconductors NV (NXPI), and Analog Devices (ADI) are down more than -2%.

Energy stocks and energy service providers are under pressure today with the price of WTI crude down more than -4% to a 2-week low.  As a result, APA Corp (APA) is down more than -5%, and Diamondback Energy (FANG) is down more than -4%.  Also, Valero Energy (VLO) and Occidental Petroleum (OXY) are down more than -3%.  In addition, Marathon Oil (MRO), Baker Hughes (BKR), ConocoPhillips (COP), Devon Energy (DVN), Exxon Mobil (XOM), Haliburton (HAL), and Schlumberger (SLB) are down more than -2%.

Managed healthcare stocks are moving lower today, led by a -6% fall in UnitedHealth Group (UNH) after trimming its full-year adjusted EPS forecast to $27.50-$27.75 from a previous forecast of $27.50-$28.00, the midpoint below the consensus of $27.68.  Also, Centene (CNC) and Elevance Health (ELV) are down more than -3%.  In addition, Humana (HUM), CVS Health (CVS), and Molina Healthcare (MOH) are down more than -1%. 

Noble Corp (NE) is down more than -3% after Benchmark Company LLC downgraded the stock to hold from buy.   

Appfolio Inc (APPF) is down more than -6% after Keefe, Bruyette & Woods downgraded the stock to underperform from market perform with a price target of $193.

Walgreens Boots Alliance (WBA) is up more than +14% to lead gainers in the S&P 500 after reporting Q4 sales of $37.55 billion, above the consensus of $35.56 billion, and forecasting 2025 sales of $147 billion-$151 billion, stronger than the consensus of $146.9 billion. 

Charles Schwab (SCHW) is up more than +7% after reporting Q3 net interest revenue of $2.22 billion, better than the consensus of $2.20 billion. 

Marvell Technology (MRVL) is up more than +3% to lead gainers in the Nasdaq 100 on signs of insider buying after an SEC filing showed CEO Murphy bought $1.01 million of shares on Monday.

Wolfspeed (WOLF) is up more than +19% after it said it is in line to win $750 million in US government grants as well as $750 million in financing led by Apollo Global Management to support its factory expansion plans.   

Doximity (DOCS) is up more than +2% after Barclays upgraded the stock to overweight from equal weight with a price target of $52.

Bank of America (BAC) is up more than +1% after reporting Q3 trading revenue ex-DVA of $4.94 billion, better than the consensus of $4.57 billion.

Apple (AAPL) is up more than +1% at a record high to lead gainers in the Dow Jones Industrials after introducing a new powerful iPad mini built for its Apple Intelligence AI features. 

Earnings Reports (10/15/2024)

Bank of America Corp (BAC), Charles Schwab Corp/The (SCHW), Citigroup Inc (C), Goldman Sachs Group Inc/The (GS), JB Hunt Transport Services Inc (JBHT), Johnson & Johnson (JNJ), Omnicom Group Inc (OMC), PNC Financial Services Group Inc (PNC), Progressive Corp/The (PGR), State Street Corp (STT), United Airlines Holdings Inc (UAL), UnitedHealth Group Inc (UNH), Walgreens Boots Alliance Inc (WBA).

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