Stocks Fall on Weakness in Retailers and Chip Makers

The S&P 500 Index ($SPX) (SPY) today is down -0.56%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.12%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.75%.

Stocks today are moderately lower ahead of quarterly earnings results from Nvidia after the close.  Target is down more than -20%, leading retailers lower after cutting its full-year outlook due to flat sales and an inventory buildup.  Also, technology stocks are under pressure today from weakness in chip stocks. 

On the positive side, health insurance stocks are climbing today after RBC Capital Markets said the nomination of Mehmet Oz to lead the Centers for Medicare and Medicaid Services is a positive for the sector.  Also, geopolitical tensions in Europe were ratcheted lower after Reuters reported that Russian President Putin is willing to talk with US President-elect Trump about a cease-fire deal in Ukraine that could roughly freeze the war along current front lines.

Comments today from Fed Governor Cook were neutral to slightly dovish when she said, "It likely will be appropriate to move the policy rate toward a more neutral stance over time," but the "magnitude and timing" of reductions will depend on incoming data and the economic outlook.

US MBA mortgage applications rose +1.7% in the week ended November 15, with the purchase mortgage sub-index up +2.0% and the refinancing mortgage sub-index +1.8%.  The average 30-year fixed rate mortgage rose +4 bp to a 4-month high of 6.90% from 6.86% in the prior week.

The markets are eagerly awaiting quarterly earnings results from Nvidia after today’s close to see if the world’s most valuable company will show that strong spending for its AI hardware can continue.  The consensus is for Nvidia to report record Q3 revenue of $33.25 billion and forecast Q4 revenue of $37.1 billion.  Also, the consensus is for 2025 revenue of $126.58 billion. 

Of the 90% of companies in the S&P 500 that have released Q3 earnings so far, 75% surpassed the estimates, slightly below the 3-year average.  According to Bloomberg Intelligence, companies in the S&P 500 have reported an average +8.5% y/y increase in quarterly earnings in Q3, more than double the preseason forecast.

The markets are discounting the chances at 56% for a -25 bp rate cut at the December 17-18 FOMC meeting.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is down -0.14%.  China's Shanghai Composite Index closed up +0.66%.  Japan's Nikkei Stock 225 Index closed down -0.16%.

Interest Rates

December 10-year T-notes (ZNZ24) today are down -7 ticks.  The 10-year T-note yield is up +1.2 bp to 4.408%.  Dec T-notes today are moderately lower due to carryover pressure from weakness in European government bonds.  Also, an easing of Ukraine-Russian tensions has curbed some safe-haven demand for T-notes after Reuters reported that Russian President Putin was willing to talk to US President-elect Trump about a cease-fire deal in Ukraine.  In addition, supply pressures are weighing on T-notes as the Treasury will auction $16 billion of 20-year T-bonds this afternoon.  T-notes recovered from their worst levels today’s stock slump sparked some short-covering in T-notes.

European government bond yields today are moving higher.  The 10-year German bund yield is up +0.8 bp to 2.346%.  The 10-year UK gilt yield is up +3.2 bp to 4.474%.

Eurozone Q3 negotiated pay rose +5.4% y/y, the largest increase since the euro was introduced in 1999.

UK Oct CPI rose +2.3% y/y, stronger than expectations of +2.2% y/y. UK Oct core CPI rose +3.3% y/y, stronger than expectations of +3.1% y/y.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 18% for a -50 bp rate cut at the same meeting.

US Stock Movers

Target (TGT) is down more than -20% to lead losers in the S&P 500 and lead retailers lower after reporting Q3 comparable sales rose +0.3%, well below the consensus of +1.48%, and cut its 2025 adjusted EPS forecast to $8.30-$8.90 from a previous estimate of $9.00-$9.70, weaker than the consensus of $9.57.  Also, Dollar General (DG) is down more than -4%, and Dollar Tree (DLTR) is down more than -3%.  In addition, Costco Wholesale (COST) Is down more than -1%, and TJX Cos (TJX) and Ross Stores (ROST) are down at least -0.40%.

Qualcomm (QCOM) is down more than -5% to lead chip stocks lower after Susquehanna Financial cut its price target on the stock to $210 from $230.   Also, Broadcom (AVGO) and GlobalFoundries (GFS) are down more than -2%.  In addition, Nvidia (NVDA), ON Semiconductor (ON), Advanced Micro Devices (AMD), Intel (INTC), ASML Holding NV (ASML), Microchip Technology (MCHP), and Texas Instruments (TXN) are down more than -1%. 

Fabrinet (FN) is down more than -9% after B Riley Securities downgraded the stock to sell from neutral with a price target of $178. 

XP Inc (XP) is down more than -5% after reporting Q3 revenue below expectations, and CFO Mansur said that equity markets will face more difficulties next year due to the macroeconomic situation.

Powell Industries (POWL) is down more than -13% after reporting Q4 revenue of $275.1 million, weaker than the consensus of $284.3 million. 

Palantir Technologies (PLTR) is down more than -2% after Jeffries said the company has an “unsustainable” multiple as it maintained its underperform rating on the stock with a price target of $28. 

JPMorgan Chase (JPM) is down more than -1% after Oppenheimer downgraded the stock to perform from outperform.

Keysight Technologies (KEYS) is up more than +5% to lead gainers in the S&P 500 after reporting Q4 revenue of $1.29 billion, better than the consensus of $1.26 billion, and forecast Q1 revenue of $1.27 billion-$1.29 billion, stronger than the consensus of $1.24 billion. 

Health insurance stocks are climbing today after RBC Capital Markets said the nomination of Mehmet Oz to lead the Centers for Medicare and Medicaid Services is a positive for the sector.  As a result, Humana (HUM) is up more than +3%, and UnitedHealth Group (UNH) is up more than +2% to lead gainers in the Dow Jones Industrials.  Also, Molina Healthcare (MOH) is up more than +2%, and Centene (CNC) and CVS Health (CVS) are up more than +1%. 

Williams-Sonoma (WSM) is up more than +27% after reporting Q3 adjusted EPS of $1.96, stronger than the consensus of $1.76.

Wix.com (WIX) is up more than +13% after boosting its full-year revenue forecast to $.176 billion from a previous forecast of $1.75 billion-$1.76 billion.

Flex Ltd (FLEX) is up more than +8% after S&P Dow Jones Indices said the stock will replace Azenta in the S&P MidCap 400 effective November 27. 

Newell Brands (NWL) is up more than +3% after Barclays upgraded the stock to overweight from equal weight with a price target of $10. 

AppLovin (APP) is up more than +2% after Piper Sandler initiated coverage on the stock with a recommendation of overweight and a price target of $400. 

Earnings Reports (11/20/2024)

NVIDIA Corp (NVDA), Palo Alto Networks Inc (PANW), Snowflake Inc (SNOW), Target Corp (TGT), TJX Cos Inc/The (TJX), Williams-Sonoma Inc (WSM).