Stocks Gains Evaporate as Apple Plans to Slow Hiring and Spending

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Monday closed down -0.84%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.69%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.89%. 

U.S. stock indexes on Monday gave up an early advance and turned lower.  Apple erased an early rally and closed down more than -2% Monday after Bloomberg reported the company plans to slow hiring and spending growth next year in some divisions to cope with a potential economic downturn.  Stocks also fell back Monday after data showed the U.S. July NAHB housing market index fell more than expected to a 2-year low.

U.S. stock indexes Monday initially opened higher, with the S&P 500 and Nasdaq 100 posting 1-week highs and the Dow Jones Industrials posting a 2-1/2 week high.  Stocks rose on hopes that the Fed may not be as aggressive as earlier feared about tightening monetary policy.  A gauge of long-term U.S. inflation expectations from the University of Michigan declined last Friday, which prompted several Fed policymakers to argue against raising rates by more than 75 bp.  In addition, better-than-expected quarterly earnings results Monday from Goldman Sachs lifted its stock by more than +2% and were positive for the overall market.

Stocks had carry-over support from a +1.5% jump Monday in the Shanghai Composite on speculation China will soon boost stimulus measures.  PBOC Governor Yi Gang said that China’s central bank would step up efforts to provide stronger economic support amid the pandemic and external headwinds. 

Today’s stock movers…

Apple (AAPL) closed down more than -2% Monday to weigh on technology stocks after Bloomberg reported that Apple plans to slow hiring and spending growth next year in some divisions to deal with a potential economic downturn. 

Seagen (SGEN) closed down more than -5% Monday to lead losers in the Nasdaq 100 after the Wall Street Journal reported that Merck’s $40 billion deal to acquire the company is delayed until Merck’s quarterly earnings are released later this month. 

Weakness in life science tools and services stocks Monday weighed on the overall market.  Bio-Rad Laboratories (BIO), Danaher (DHR), Thermo Fisher Scientific (TMO), and Charles River Laboratories (CRL) closed down by more than -3%. Also, Stryker (SYK) and West Pharmaceutical Services (WST) closed down by more than -2%.

Hologic (HOLX) closed down more than -3% Monday after BIG LLC cut its recommendation on the stock to neutral from buy.

Cruise line operators rose Monday on signs of industry expansion after Royal Caribbean Cruises said it received court approval to acquire the ultra-luxury cruise ship Endeavor for $275 million.  Carnival (CCL) and Royal Caribbean Cruises (RCL) closed up more than +5%, and Norwegian Cruise Line Holdings (NCLH) closed up more than +4%. 

Energy stocks and energy service providers pushed higher Monday after the price of crude oil surged more than +5%.  Devon Energy (DVN), Haliburton (HAL), Marathon Oil (MRO), and Diamondback Energy (FANG) closed up more than +3%.  Also, ConocoPhillips (COP), Schlumberger (SLB), and Occidental Petroleum (OXY) closed up more than +2%.

Solar stocks rallied Monday on speculation higher energy costs will push more countries to invest in their solar-energy producing capabilities.  Germany announced that it produced a record 38,174 megawatts from solar panels on Sunday.  Enphase Energy (ENPH) and SolarEdge Technologies (SEDG) closed up more than -5%.  Also, Array Technologies (ARRY) and First Solar (FSLR) closed up more than +2%. 

Goldman Sachs (GS) closed up more than +2% Monday to lead gainers in the Dow Jones Industrials after reporting Q2 trading revenue of $6.47 billion, well above the consensus of $5.82 billion.

Across the markets…

Sep 10-year T-notes (ZNU22) on Monday closed down -5.5 ticks, and the 10-year T-note yield rose +4.6 bp to 2.961%.  Increased corporate issuance weighed on T-note prices Monday, with $18 billion in corporate debt priced Monday after only $23 billion was priced in the first two weeks of July.  Bond fund managers short T-note futures as a hedge until they can distribute their newly purchased corporate securities.  T-note prices bounced off their worst levels Monday after the U.S. July NAHB housing market index fell more than expected to a 2-year low and after stocks gave up early gains and turned lower, which sparked some safe-haven buying of T-notes.

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