Stocks Settle Lower as Tesla and Apple Slump

The S&P 500 Index ($SPX) (SPY) Thursday closed down -0.22%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.36%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.17%.  March E-mini S&P futures (ESH25) are down -0.25%, and March E-mini Nasdaq futures (NQH25) are down -0.25%. 

Stocks on Thursday gave up an early advance and settled lower, with the S&P 500 posting a 1-3/4 month low, the Dow Jones Industrials posting a 1-month low, and the Nasdaq 100 posting a 1-1/2 week low.  The weakness in the megacap stocks of Tesla and Apple weighed on the broader market.  Tesla fell more than -6% Thursday after it reported fewer than-expected Q4 auto deliveries.  Also, Apple fell more than -2% after Reuters reported it was offering discounted smartphones in China due to rising competition from domestic rivals like Huawei.  

Stocks were also under pressure on Thursday after T-note yields recovered from an early decline and were little changed on signs of strength in the US economy that is hawkish for Fed policy after weekly initial unemployment claims unexpectedly fell to an 8-month low, and the Dec S&P manufacturing PMI was revised higher.

Stocks on Thursday initially moved higher as chip stocks recovered from Tuesday’s losses.  Also, energy stocks moved higher after the price of WTI crude oil rallied more than +1% to a 2-1/2 month high. 

Signs of weakness in Chinese manufacturing activity hammered Chinese stocks and are negative for global growth prospects.  The Shanghai Composite Stock Index tumbled more than -2% today to a 5-week low after the China Dec Caixin manufacturing PMI unexpectedly fell -1.0 to 50.5, weaker than expectations of an increase to 51.7. 

Low volumes and thin trading conditions during this holiday week may lead to exaggerated stock moves.  The markets are awaiting Friday’s US Dec ISM manufacturing index for market direction and to gauge the health of the US manufacturing sector.  Expectations are for the Dec ISM Manufacturing Index to slip -0.2 to 48.2.   

US MBA mortgage applications fell -12.6% in the week ended December 27, with the purchase mortgage sub-index down -6.8% and the refinancing sub-index down -23.4%.  The average 30-year fixed mortgage rate rose +8 bp to a 5-1/2 month high of 6.97% from 6.89% in the prior week.

US weekly initial unemployment claims unexpectedly fell -9,000 to an 8-month low of 211,000, showing a stronger labor market than expectations of an increase to 221,000.

The US Dec S&P manufacturing PMI was revised upward by +1.1 to 49.4 from the previously reported 48.3.

US Nov construction spending was unchanged m/m, weaker than expectations of +0.3% m/m.

The markets are discounting the chances at 11% for a -25 bp rate cut at the January 28-29 FOMC meeting.

Overseas stock markets on Thursday settled mixed.  The Euro Stoxx 50 climbed to a 2-week high and closed up +0.45%.  China’s Shanghai Composite Index dropped to a 5-week low and closed down -2.66%.  Japan’s Nikkei Stock 225 was closed for the New Year’s Day holiday.

Interest Rates

March 10-year T-notes (ZNH25) Thursday closed up +2 ticks.  The 10-year T-note yield was unchanged at 4.569%.  Mar T-notes Thursday posted modest gains on early carryover support from strength in European government bonds as 10-year German bunds and 10-year UK gilts rose to 1-week highs.  However, T-notes gave up most of their advance on signs of US economic strength that are hawkish for Fed policy after weekly US jobless claims unexpectedly fell to an 8-month low and the Dec S&P manufacturing PMI was revised higher. Also, Thursday’s rally in WTI crude oil to a 2-1/2 month high raised inflation expectations, a bearish factor for T-notes.

European government bond yields Thursday erased early declines and finished higher.  The 10-year German bund yield rebounded from a 1-week low of 2.309% and finished up +1.2 bp to 2.379%.  The 10-year UK gilt yield rebounded from a 1-week low of 4.520% and finished up +2.7 bp to 4.595%.

The Eurozone Dec S&P manufacturing PMI was revised downward by -0.1 to 45.1 from the previously reported 45.2.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its January 30 policy meeting and at 12% for a -50 bp rate cut at that meeting.

US Stock Movers

Tesla (TSLA) closed down more than -6% to lead losers in the S&P 500 and Nasdaq 100 after reporting Q4 auto deliveries of 495,570, below the consensus of 512,277.

Apple (AAPL) closed down more than -2% after Reuters reported it was offering discounted smartphones in China due to rising competition from domestic rivals like Huawei.  

Neumora Therapeutics (NMRA) is down more than -81% after saying a Phase 3 study of its navacaprant for the treatment of depression didn’t show statistically significant improvement or key secondary endpoint. 

SoFi Technologies (SOFI) closed down more than -8% after Keefe, Bruyette & Woods downgraded the stock to underperform from market perform with a price target of $8. 

Healthcare Realty Trust (HR) closed down more than -2% after Wedbush downgraded the stock to underperform from neutral with a price target of $16. 

Check Point Software Technologies Ltd (CHKP) closed down more than -1% after Goldman Sache downgraded the stock to neutral from buy,

CareTrust REIT (CTRE) closed down more than -1% after Wedbush downgraded the stock to underperform from neutral with a price target of $26. 

Chip stocks moved higher Thursday and supported the overall market.  ARM Holdings Plc (ARM) and Micron Technology (MU) closed up more than +3%, and Nvidia (NVDA) closed up more than +2% to lead gainers in the Dow Jones Industrials.  Also, Marvell Technology (MRVL), ASML Holding NV (ASML), and KLA Corp (KLAC) closed more than +1%.

Energy stocks rallied Thursday as the price of WTI crude oil rose by more than +1% to a 2-1/2 month high.  As a result, Devon Energy (DVN) closed up more than +2%.  Also, Baker Hughes (BKR), Haliburton (HAL), Hess Corp (HES),  Chevron (CVX), Diamondback Energy (FANG), APA Corp (APA), and Marathon Petroleum (MPC) closed up more than +1%. 

Cloudflare (NET) closed up more than +4% after Goldman Sachs double-upgraded the stock to buy from sell with a price target of $140.

Cryptocurrency-exposed stocks rose Thursday as the price of Bitcoin (^BTCUSD) climbed more than +2%.  As a result, Coinbase Global (COIN), Bit Digital (BTBT), MARA Holdings (MARA), and MicroStrategy (MSTR) are up more than +2%. 

Newmont Corp (NEM) closed up more than +3% after the price of gold rose more than +1% to a 2-week high.

Douglas Emmett Inc (DEI) closed up more than +1% after Wedbush upgraded the stock to outperform from neutral with a price target of $21. 

Earnings Reports (1/3/2025)

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