Stocks Fall on Economic Concerns and Slump in Chip Makers

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Wednesday closed down -1.08%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.81%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.76%.

U.S. stock indexes Wednesday posted moderate losses. Global economic concerns weighed on stocks Wednesday after the OECD cut its 2022 global GDP forecast.  Stocks also saw downward pressure from inflation concerns as crude oil prices Wednesday rallied to a 3-month high.  In addition, higher T-note yields undercut stocks after the 10-year T-note yield Wednesday rose +4.9 bp to 3.023%, climbing back above the 3.00% level. 

A plunge of more than -5% in Intel Wednesday pulled chip stocks lower and weighed on the overall market.  Citigroup said it was cutting its full-year sales estimate for the company after Intel warned of slower business this quarter during a technology conference. 

The Organization for Economic Cooperation and Development (OECD) cut its 2022 global GDP forecast to 3.0% from a 4.5% estimate in December.

Today’s stock movers…

Altria Group (MO) closed down more than -8% Wednesday to lead losers in the S&P 500 after Morgan Stanley downgraded the stock to underweight, citing increasing macro pressures and competitive risks.

Intel (INTC) closed down more than -5% Wednesday to lead losers in the Dow Jones Industrials and Nasdaq 100 after Citigroup said it was cutting its full-year sales estimate for the company to $71.9 billion from a previous estimate of $74.4 billion and said “we now expect Intel to negatively pre-announce or miss Q2 guidance.” 

Other chipmakers moved lower as well, with Advanced Micro Devices (AMD) and Micron Technology (MU) closing down more than -3%.   Also, NXP Semiconductors NV (NXPI), Marvell Technology (MRVL), Microchip Technology (MCHP), and Texas Instruments (TXN) all closed down by more than -2%. 

Cruise line stocks tumbled Wednesday after Morgan Stanley cut its price targets on cruise operators, citing growing macro risks and rising debt costs.  As a result, Carnival (CCL) closed down by more than -6%.  Also, Royal Caribbean Cruises Ltd (RCL) closed down by more than -5%, and Norwegian Cruise Line Holdings (NCLH) closed down by more than -4%.

Airline stocks retreated Wednesday on concern that soaring inflation will strain consumer spending and demand for air travel.  Also, Wednesday’s rally in crude prices to a 3-month high will push jet fuel prices higher and eat into airlines’ profits.  United Airlines Holdings (UAL) closed down more than -4%.  Also, Delta Air Lines (DAL), Southwest Airlines (LUV), and American Airlines Group (AAL) closed down by more than -3%.

U.S.-listed Chinese stocks rallied Wednesday after China approved the second batch of video games this year, signaling an easing of its regulatory crackdown and supporting China’s internet sector.  Pinduoduo (PDD) closed up more than +9% to lead gainers in the Nasdaq 100.  Also, Alibaba Group Holding (BABA) closed up more than +14%, and JD.com (JD) closed up more than +7%.  In addition, NetEase (NTES) closed up more than +3%, and Baidu (BIDU) closed up more than +1%. 

Moderna (MRNA) closed up more than +2% Wednesday after it said its Covid-19 vaccine that targets omicron generated a “superior” immune response against the variant compared to its original shot that could pave the way for another round of booster shots in the fall.

Caterpillar (CAT) closed up more than +1% Wednesday to lead gainers in the Dow Jones Industrials after raising its quarterly dividend +8.1% to $1.20 a share.   

Across the markets…

September 10-year T-notes (ZNU22) on Wednesday closed down -11 ticks, and the 10-year T-note yield rose +4.9 bp to 3.023%. A jump in European government bond yields weighed on T-note prices Wednesday after the 10-year German bund yield rose to an 8-year high of 1.363%.  Supply pressures also weighed on T-note prices as the Treasury Wednesday auctioned $33 billion of 10-year T-notes as part of this week’s sale of $96 billion of T-notes and T-bonds.

T-notes maintained moderate losses Wednesday afternoon on weak demand for the Treasury’s $33 billion 10-year T-note auction.  The auction had a bid-to-cover ratio of 2.41, well below the 10-auction average of 2.52.