Stocks Finish Lower on Mixed Economic News and Tech Stock Weakness

The S&P 500 Index ($SPX) (SPY) Wednesday closed down -0.38%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.31%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.85%.

Stocks on Wednesday settled moderately lower, with the Dow Jones Industrials falling back from a new all-time high.  Some negative corporate news on Wednesday weighed on the broader market.  Dell Technologies closed down more than -12% after reporting weaker-than-expected Q3 total net revenue.  Also, HP Inc. closed down more than -11% after forecasting Q1 adjusted EPS below consensus.  In addition, Symbotic plunged more than -38 % after saying it could not file its annual Form 10-K for the fiscal year ended September 28, 2024, on time because it needs to assess the financial impacts of an error related to system revenue recognition. Finally, the weakness in chip stocks weighed on technology stocks and the overall market. 

However, stocks found some support on mixed US economic news that knocked T-note yields lower, as the 10-year T-note yield fell to a 3-1/2 week low.  Oct capital goods orders nondefense ex-aircraft and parts, a proxy for capital spending, unexpectedly fell, and Q3 GDP personal consumption was revised lower. Weekly jobless claims news was mixed as initial unemployment claims unexpectedly fell to a 7-month low, but continuing claims unexpectedly rose to a 3-year high.

US MBA mortgage applications rose +6.3% in the week ended November 22, with the purchase mortgage sub-index up +12.4% and the refinancing sub-index down -2.6%.  The average 30-year fixed rate mortgage fell -4 bp to 6.86% from 6.90% in the prior week. 

US Q3 GDP was unrevised at 2.8% (q/q annualized), right on expectations, although Q3 personal consumption was revised downward by -0.2 to 3.5% from 3.7%.

US Oct capital goods orders nondefense ex-aircraft and parts, a proxy for capital spending, unexpectedly fell -0.2% m/m, weaker than expectations of a +0.1% m/m increase. 

US weekly initial unemployment claims unexpectedly fell -2,000 to a 7-month low of 213,000, showing a stronger labor market than expectations of 215,000.  However, weekly continuing claims unexpectedly rose +9,000 to a 3-year high of 1.907 million, showing a weaker labor market than expectations of a decline to 1.892 million.

The US Nov MNI Chicago PMI unexpectedly fell -1.4 to 40.2, weaker than expectations of an increase to 45.0 and the steepest pace of contraction in 6 months.

US Oct personal spending rose +0.4% m/m, right on expectations.  Oct personal income rose +0.6% m/m, stronger than expectations of +0.3% m/m.

The US Oct core PCE price index, the Fed's preferred inflation gauge, rose +0.3% m/m and +2.8% y/y, right on expectations.

US Oct pending home sales unexpectedly rose +2.0% m/m, stronger than expectations of a -2.0% m/m decline.

The markets are discounting the chances at 67% for a -25 bp rate cut at the December 17-18 FOMC meeting.

Overseas stock markets Wednesday settled mixed.  The Euro Stoxx 50 closed down -0.61%.  China's Shanghai Composite Index recovered from a 5-week low and closed up by +1.53%.  Japan's Nikkei Stock 225 closed down -0.80%.

Interest Rates

December 10-year T-notes (ZNZ24) Wednesday closed up +13 ticks.  The 10-year T-note yield fell -5.0 bp to 4.246%. Dec T-notes Wednesday rallied to a 3-1/2 week high, and the 10-year T-note yield fell to a 3-1/2 week low of 4.225%.  T-notes rose Wednesday on carryover support from strength in European government bonds. Also, a downward revision to the US Q3 core PCE price index supported T-notes.  In addition, a decline in inflation expectations was bullish for T-notes after the 10-year breakeven inflation rate dropped to a 6-week low Wednesday at 2.266%.  Finally, strong demand for the Treasury’s $44 billion auction of 7-year T-notes lifted T-note prices as the auction had a bid-to-cover ratio of 2.71, well above the 10-auction average of 2.58. 

European government bond yields Wednesday moved lower.  The 10-year German bund yield fell to a 1-3/4 month low of 2.135% and finished down -2.7 bp to 2.160%.  The 10-year UK gilt yield fell to a 4-week low of 4.287% and finished down -5.8 bp to 4.295%.

The German Dec GfK consumer confidence index fell -4.9 to a 7-month low of -23.3, weaker than expectations of -18.8.

ECB Executive Board member Schnabel said the ECB needs to be wary of cutting interest rates too far as borrowing costs are already near the neutral threshold, and going lower could backfire.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 16% for a -50 bp rate cut at the same meeting.

US Stock Movers

Dell Technologies (DELL) closed down more than -12% to lead losers in the S&P 500 after reporting Q3 total net revenue of $24.37 billion, weaker than the consensus of $24.59 billion. 

HP Inc (HPQ) is down more than -13% after forecasting Q1 adjusted EPS of 70 cents-76 cents, below the consensus of 86 cents. 

Autodesk (ADSK) closed down more than -8% to lead losers in the Nasdaq 100 after reporting Q3 adjusted operating margin of 36.0%, below the consensus of 36.1%. 

Workday (WDAY) closed down more than -5% after cutting its 2025 subscription revenue estimate to $7.70 billion from a previous estimate of $7.70 billion-$7.73 billion, weaker than the consensus of $7.72 billion. 

Chip stocks retreated Wednesday to weigh on the overall market. Micron Technology (MU), Broadcom (AVGO), and Marvell Technology (MRVL) closed down more than -3%.  Also, GlobalFoundries (GFS), ARM Holdings (ARM), and Intel (INTC) closed down more than -2%.  In addition, Nvidia (NVDA), Lam Research (LRCX), Advanced Micro Devices (AMD), Applied Materials (AMAT), and Texas Instruments (TXN) closed down more than -1%. 

Symbotic (SYM) closed down more than -38% after saying it is unable to file its annual Form 10-K for the fiscal year ended September 28, 2024, on time because it needs to assess the financial impacts of an error related to system revenue recognition. 

Guess?  (GES) closed down more than -5% after reporting Q3 net revenue of $738.5 million, weaker than the consensus of $749.5 million, and cutting its 2024 revenue estimate in dollars to +7.1% to +8.1% from a previous estimate of +9.5% to +11%. 

Crowdstrike Holdings (CRWD) closed down more than -5% after forecasting Q4 adjusted EPS of 84 cents-86 cents, weaker than the consensus of 87 cents. 

Ulta Beauty (ULTA) closed up more than +4% after D.A. Davidson said competitive pressures on the company are “showing some signs of alleviation.”

VeriSign (VRSN) closed up more than +3% after the Internet Corporation for Assigned Names and Numbers (ICANN) renewed the .com registry agreement to the company with no changes to the provision governing the price that VeriSign charges for domain names.

Urban Outfitters (URBN) closed up more than +17% after reporting Q3 net sales of $1.36 billion, above the consensus of $1.33 billion. 

Embecta (EMBC) closed up more than +9% after BTIG LLC upgraded the stock to buy from neutral with a price target of $26.

Ambarella (AMBA) closed up more than +5% after reporting Q3 adjusted EPS of 11 cents, well above the consensus of 4 cents. 

Foot Locker (FL) closed up +3% after Williams Trading upgraded the stock to hold from sell, citing its improved product lineup.

Paramount Global (PARA) closed up +0.84% after CFRA upgraded the stock to buy from hold with a price target of $13.

Earnings Reports (11/29/2024)

Cleanspark Inc (CLSK), iLearningEngines Holdings Inc (AILE), Ingles Markets Inc (IMKTA), Nordic American Tankers Ltd (NAT), Patterson Cos Inc (PDCO), Renovaro Inc (RENB), Zuora Inc (ZUO).