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The S&P 500 Index ($SPX) (SPY) Tuesday closed down -0.50%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.50%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.38%.
US stocks settled mixed on Tuesday, with the Dow Jones Industrials posting a 1-1/2 week high and the Nasdaq 100 falling to an 8-week low. Stocks gave up early gains Tuesday and traded mixed on an escalation of geopolitical risks after Israel’s military struck a Hezbollah target in Beirut, which threatens to widen the conflict in the Middle East and sparked long liquidation in stocks. A slump in chip stocks Tuesday also weighed on the broader market.
Stocks on Tuesday initially moved higher on some favorable corporate earnings results. Howmet Aerospace closed up more than +12% after boosting its full-year adjusted EPS forecast. Also, Stanley Black & Decker closed up more than +9% after reporting stronger-than-expected Q2 net sales. In addition, PayPal Holdings closed up more than +7% after reporting better-than-expected Q2 net revenue and boosting its 2024 profit forecast.
On the negative side, Merck & Co. closed down more than -9% after cutting its full-year adjusted EPS forecast. Also, CrowdStrike Holdings closed down more than -9% on reports that Delta Air Lines is seeking compensation from the company for the IT outage it caused earlier this month. In addition, Corning closed down more than -7% after forecasting weaker-than-expected Q3 core sales.
Tuesday’s US economic news was stronger than expected, a hawkish factor for Fed policy that was negative for stocks.
The US May S&P CoreLogic composite-20 home price index rose +6.81% y/y, stronger than expectations of +6.60% y/y.
US Jun JOLTS job openings fell -46,000 to 8.184 million, showing a stronger labor market than expectations of 8.000 million.
The Conference Board US Jul consumer confidence index rose +2.5 to 100.3, stronger than expectations of 99.7.
Major central banks are meeting this week to decide on monetary policy. The Bank of Japan (BOJ) is expected to release details of plans to cut monthly bond purchases after its two-day policy meeting on Wednesday and possibly begin raising interest rates after a report Tuesday from public broadcaster NHK said that BOJ board members would discuss raising interest rates to 0.25% from the current range of 0% to 0.1% on Wednesday. The Federal Reserve is likely to signal its intention to cut interest rates in September after its two-day meeting on Wednesday. On Thursday, the Bank of England (BOE) is expected to cut its bank rate by 25 bp to 5.00% from 5.25%.
Stock investors will continue to focus on tech stocks, with key earnings reports on tap for this week. Magnificent 7 companies reporting this week include Microsoft (MSFT) after Tuesday’s close, Meta (META) on Wednesday, and Apple (AAPL) and Amazon (AMZN) on Thursday. Nvidia (NVDA) is expected to report earnings on August 28. Tesla (TSLA) and Alphabet (GOOG) were the first of the Magnificent 7 to report earnings, with their reports last Wednesday.
The market consensus is that Q2 earnings for the S&P 500 companies will rise +9% y/y. About one-third of the companies in the S&P 500 have reported thus far. According to Bloomberg, most reporting companies have beaten their earnings consensus, but only 43% have beaten revenue expectations, the lowest percentage in five years.
The markets are discounting the chances for a -25 bp rate cut at 4% for this week's FOMC meeting on Tue/Wed and 100% for the following meeting on September 17-18 if the FOMC does not cut rates next week.
Overseas stock markets Tuesday settled mixed. The Euro Stoxx 50 closed up +0.53%. China's Shanghai Composite fell to a 5-1/2 month low and closed down -0.43%. Japan's Nikkei Stock 225 Index closed up by +0.15%.
Interest Rates
September 10-year T-notes (ZNU24) Tuesday closed up +7 ticks. The 10-year T-note yield fell -2.9 bp to 4.145%. Sep T-notes Tuesday rallied to a 5-1/2 month nearest-futures high, and the 10-year T-note yield fell to a 4-1/2 month low of 4.128%. T-notes jumped Tuesday on a surge in safe-haven demand due to rising geopolitical tensions after Israel carried out a strike in Lebanon targeting a Hezbollah commander. T-notes also had carryover support from a rally in European government bonds.
T-notes Tuesday initially turned lower due to stronger than expected US economic reports on May S&P CoreLogic composite-20 home prices, Jun JOLTS job openings, and Jul consumer confidence, hawkish factors for Fed policy.
European government bond yields on Tuesday moved lower. The 10-year German bund yield fell to a 3-1/2 month low of 2.333% and finished down -1.9 bp at 2.340%. The 10-year UK gilt yield fell -0.6 bp to 4.043%.
Eurozone Q2 GDP grew +0.3% q/q and +0.6% y/y, stronger than expectations of +0.2% q/q and +0.5% y/y.
Eurozone Jul economic confidence fell -0.1 to 95.8, stronger than expectations of 95.2.
German Jul CPI (EU harmonized) rose +0.5% m/m and +2.6% y/y, stronger than expectations of +0.4% m/m and +2.5% y/y.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 95% for the September 12 meeting.
US Stock Movers
CrowdStrike Holdings (CRWD) closed down more than -9% to lead losers in the S&P 500 and Nasdaq 100 on reports that Delta Air Lines is seeking compensation from the company for the IT outage it caused earlier this month from a failed software upgrade.
Merck & Co (MRK) closed down more than -9% to lead losers in the S&P 500 and Dow Jones Industrials after cutting its full-year adjusted EPS forecast to $7.94-$8.04 from a previous forecast of $8.53-$8.65.
A slump in chip stocks Tuesday pressured the overall market. Nvidia (NVDA) closed down more than -7%. Also, Qualcomm (QCOM) and ARM Holdings Plc (ARM) closed down more than -6%. In addition, ON Semiconductor (ON), Micron Technology (MU), Broadcom (AVGO), Lam Research (LRCX), Western Digital (WDC), and Applied Materials (AMAT) closed down more than -4%. Finally, GlobalFoundries (GFS) closed down more than -3%, and Marvell Technology (MRVL) and KLA Corp (KLAC) closed down more than -2%.
Corning (GLW) closed down more than -6% after forecasting Q3 core sales of about $3.70 billion, weaker than the consensus of $3.81 billion.
Procter & Gamble (PG) closed down more than -4% after reporting Q4 net sales of $20.53 billion, below the consensus of $20.74 billion.
Amkor Technology (AMKR) closed down more than -18% after forecasting Q3 net sales of $1.79 billion-$1.89 billion, weaker than the consensus of $1.87 billion.
Symbiotic (SYM) closed down more than -23% after forecasting Q4 revenue of $455 million-$475 million, well below the consensus of $516.9 million.
Archer-Daniels-Midland (ADM) closed down more than -1% after reporting Q2 revenue of $22.25 billion, weaker than the consensus of $23.33 billion.
Howmet Aerospace (HWM) closed up more than +13% to lead gainers in the S&P 500 after boosting its full-year adjusted EPS forecast to $2.53-$2.57 from a previous estimate of $2.31-$2.39, well above the consensus of $2.38.
PayPal Holdings (PYPL) closed up more than +8% to lead gainers in the Nasdaq 100 after reporting Q2 net revenue of $7.89 billion, above the consensus of $7.82 billion and boosted its 2024 profit forecast to an increase of “low-to-mid-teens” from a previous forecast of “mid-to-high-single digit” growth.
F5 Inc (FFIV) closed up more than +12% after reporting Q3 net revenue of $695.5 million, above the consensus of $685.8 million, and forecasting Q4 revenue of $720 million-$740 million, stronger than the consensus of $715.2 million.
Stanley Black & Decker (SWK) closed up more than +9% after reporting Q2 net sales of $4.02 billion, above the consensus of $4.01 billion.
Gartner Inc (IT) closed up more than +5% after reporting Q2 adjusted EPS of $3.22, above the consensus of $3.00.
Philips 66 (PSX) closed up more than +4% after reporting Q2 adjusted EPS of $2.31, stronger than the consensus of $1.98.
Sysco (SYY) closed up more than +4% after reporting Q4 adjusted Ebitda of $1.30 billion, better than the consensus of $1.26 billion.
Zebra Technologies (ZBRA) closed up more than +3% after reporting Q2 net sales of $1.22 billion, above the consensus of $1.18 billion.
Earnings Reports (7/31/2024)
Aflac Inc (AFL), Albemarle Corp (ALB), Allstate Corp/The (ALL), Altria Group Inc (MO), American International Group Inc (AIG), American Water Works Co Inc (AWK), ANSYS Inc (ANSS), APA Corp (APA), Automatic Data Processing Inc (ADP), AvalonBay Communities Inc (AVB), Boeing Co/The (BA), BorgWarner Inc (BWA), Bunge Global SA (BG), CDW Corp/DE (CDW), Cencora Inc (COR), CH Robinson Worldwide Inc (CHRW), Cognizant Technology Solutions (CTSH), Corteva Inc (CTVA), Dayforce Inc (DAY), DuPont de Nemours Inc (DD), eBay Inc (EBAY), Etsy Inc (ETSY), Everest Group Ltd (EG), Eversource Energy (ES), Fair Isaac Corp (FICO), FMC Corp (FMC), Garmin Ltd (GRMN), GE HealthCare Technologies Inc (GEHC), Generac Holdings Inc (GNRC), Hess Corp (HES), Host Hotels & Resorts Inc (HST), Humana Inc (HUM), IDEX Corp (IEX), Ingersoll Rand Inc (IR), Johnson Controls International (JCI), KKR & Co Inc (KKR), Kraft Heinz Co/The (KHC), Lam Research Corp (LRCX), Marriott International Inc/MD (MAR), Mastercard Inc (MA), Meta Platforms Inc (META), MetLife Inc (MET), MGM Resorts International (MGM), Mid-America Apartment Communities (MAA), Norwegian Cruise Line Holdings (NCLH), Paycom Software Inc (PAYC), PTC Inc (PTC), QUALCOMM Inc (QCOM), T-Mobile US Inc (TMUS), Trane Technologies PLC (TT), Verisk Analytics Inc (VRSK), VICI Properties Inc (VICI), Waters Corp (WAT), WEC Energy Group Inc (WEC), Western Digital Corp (WDC).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.