What you need to know…
The S&P 500 Index ($SPX) (SPY) Tuesday closed down -0.20%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.18%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.58%.
Stocks on Tuesday posted moderate losses as some disappointing corporate earnings results weighed on the overall market. Also, semiconductor stocks retreated on some giveback after Monday’s sharp gains. Stocks maintained their losses following the release of the minutes of the Oct 31-Nov 1 FOMC meeting where policymakers saw interest rates remaining restrictive for “some time."
Losses in the broader market were contained as bond yields fell on weaker-than-expected U.S. Chicago Fed and existing home sales reports. The weak reports further bolstered expectations that the Fed is done raising interest rates.
Stocks came under pressure Tuesday after Goldman Sachs told clients that the recent rally in stocks increases the risk of "disappointment in the near term" amid lingering concerns about economic growth and inflation.
On the negative side for stocks, Jacobs Solutions closed down more than -8% after forecasting 2024 adjusted Ebitda below consensus. Also, Lowe’s fell more than -3% after reporting a bigger-than-expected decline in Q3 same-store sales and lowering its full-year adjusted revenue forecast. In addition, Kohl’s tumbled more than -9% after reporting a bigger-than-expected fall in Q3 same-store sales.
On the positive side, Agilent rose more than +8% after reporting stronger-than-expected Q4 net revenue. Also, Tesla closed up more than +2% after Bloomberg reported that it is nearing an agreement with India to allow exports of its cars to India from next year and set up a factory there within two years.
The U.S. Oct Chicago Fed national activity index fell -0.47 to a seven-month low of -0.49, weaker than expectations of zero.
U.S. Oct existing home sales fell -4.1% m/m to a 13-year low of 3.79 million, weaker than expectations of 3.90 million.
The minutes of the Oct 31-Nov1 FOMC meeting were neutral to slightly hawkish as they stated, "All participants agreed that the committee was in a position to proceed carefully and that policy decisions at every meeting would continue to be based on the totality of incoming information." Also, "All on the FOMC saw rates remaining restrictive for some time."
The markets are discounting a 5% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and a 5% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then discounting a 24% chance for a -25 bp rate cut at the March 19-20, 2024, FOMC meeting and a 71% chance for that same -25 bp rate cut at the Apr 30-May 1, 2024, FOMC meeting.
U.S. and European government bond yields Tuesday moved lower. The 10-year T-note yield fell -1.2 bp to 4.408%. The 10-year German bund yield fell -4.5 bp to 2.566%. The 10-year UK gilt yield fell -2.0 bp to 4.105%.
ECB President Lagarde said the ECB can't declare victory over inflation just yet and will have to remain "attentive" until it's firmly headed back to the 2% goal.
Comments from ECB Governing Council member Simkus suggest he favors keeping ECB policy steady when he said, "There's no reason to speak about a further increase this December, and market expectations that there will be ECB interest rate cuts in a few months are too optimistic in my view."
Overseas stock markets Tuesday settled lower. The Euro Stoxx 50 closed down -0.24%. China’s Shanghai Composite Index closed down -0.01%. Japan’s Nikkei Stock Index closed down -0.10%.
Today’s stock movers…
Jacobs Solutions (J) is down more than -7% to lead losers in the S&P 500 after forecasting 2024 adjusted Ebitda of $1.53 billion-$1.60 billion, weaker than the consensus of $1.61 billion.
Semiconductor stocks retreated on some giveback from Monday’s sharp gains. On Semiconductor (ON), Globalfoundries (GFS) and Marvell Technology (MRVL) closed down more than -3%. Also, Applied Materials (AMAT), Microchip Technology (MCHP), Micron Technology (MU), Intel (INTC), and Advanced Micro Devices (AMD) closed down more than -2%.
Zions Bancorp (ZION) closed down more than -4% after Citigroup downgraded the stock to neutral from buy.
Lowe’s (LOW) closed down more than -3% after reporting a -7.4% drop in Q3 same-store sales, weaker than the consensus of -4.9%, and lowered its full-year adjusted revenue forecast to a decline of -5% from a previous view of 02% to -4%.
Kohl’s (KSS) closed down more than -8% after reporting Q3 same-store sales fell -5.5%, a bigger decline than the consensus of -3.45%.
Incyte Corp (INCY) closed down more than -2% after Goldman Sachs downgraded the stock to neutral from buy.
Live Nation Entertainment (LYV) closed down more than -2% after the Senate Permanent Subcommittee on Investigations subpoenaed the company for records related to its ticket pricing, fees, and resale practices.
Stanley Black & Decker (SWK) closed down more than -2% after Moody’s Investors Service downgraded the company’s senior unsecured debt rating to Baa3 from Baa2.
Agilent (A) closed up more than +8% to lead gainers in the S&P 500 after reporting Q4 net revenue of $1.69 billion, better than the consensus of $1.67 billion.
Medtronic Plc (MDT) closed up more than +4% after reporting Q2 adjusted EPS of $1.25, stronger than the consensus of $1.18.
Tesla (TSLA) closed up more than +2% to lead gainers in the Nasdaq 100 after Bloomberg reported that it is nearing an agreement with India to allow exports of its cars to India from next year and set up a factory there within two years.
Burlington Stores (BURL) closed up more than +20% after reporting Q3 comparable sales rose +6.00%, above the consensus of +5.88%.
Hibbett (HIBB) closed up more than +9% after reporting Q3 EPS of $2.05, well above the consensus of $1.18, and raising its 2024 EPS forecast to $8.00-$8.30 from a previous estimate of $7.00-$7.75, stronger than the consensus of $7.27.
Dick’s Sporting Goods (DKS) closed up more than +2% after reporting Q3 net sales of $3.04 billion, above the consensus of $2.95 billion, and raised its 2024 comparable sales forecast to +0.5% to +2.0% from a previous view of 0% to +2.0%, the midpoint above the consensus of +1.02%.
Gen Digital (GEN) closed up more than +1% after Morgan Stanley upgraded the stock to overweight from equal with a price target of $26.
Across the markets…
December 10-year T-notes (ZNZ23) Tuesday closed up +3 ticks, and the 10-year T-note yield fell -1.2 bp to 4.408%. Dec T-notes Tuesday closed modestly higher. Weaker-than-expected U.S. economic news Tuesday boosted T-notes after the Oct Chicago Fed national activity index fell to a 7-month low and Oct existing home sales dropped to a 13-year low. Also, a decline in inflation expectations supported T-notes after the 10-year breakeven inflation rate dropped to a 1-1/4 month low Tuesday at 2.249%. T-notes fell back from their best levels Tuesday on the slightly hawkish minutes of the Oct 31-Nov 1 FOMC meeting, where policymakers saw interest rates remaining restrictive for “some time."
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.
