The S&P 500 Index ($SPX) (SPY) today is down -3.12%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -2.70%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -3.34%.
US stocks today are extending last Friday’s selloff, with the S&P 500 and Nasdaq 100 dropping to 3-month lows and the Dow Jones Industrials falling to a 7-week low. The rout in global equity markets deepened today and sparked a risk-off sentiment in asset markets. Recent weaker-than-expected US economic news has fueled concern that the Fed is too slow to cut interest rates to keep the US economy from heading for a sharp economic downturn. Megacap technology stocks are falling today to lead the overall market lower, with Apple, Nvidia, and Tesla down more than -5% as the market reprices the risk of a hard landing.
Today’s plunge in global equity markets has sparked a flight to safety into government debt and knocked bond yields lower as the 10-year T-note yield tumbled to a 14-month low, and the German 10-year bund yield fell to a 7-month low.
The plunge in stocks today has led to risk-off sentient in asset markets, with the price of Bitcoin (^BTCUSD) slumping more than -12% to a 5-1/2 month low and crude oil (CLU24) falling to a 6-month low.
Stock indexes recovered from their worst levels today as recession concerns eased after the US Jul ISM services index rose more than expected. Also, upbeat comments from Chicago Fed President Goolsbee supported stocks when he said that US economic growth continues at a "fairly steady level."
The US Jul ISM services index rose +2.6 to 51.4, stronger than expectations of 51.0.
Chicago Fed President Goolsbee said last month's job numbers "came in weaker than expected but are not looking yet like a recession" as US economic growth continues at a "fairly steady level."
The market consensus is that Q2 earnings for the S&P 500 companies will rise +9% y/y. About half 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 -50 bp rate cut at 100% for the September 17-18 FOMC meeting.
Overseas stock markets today are sharply lower. The Euro Stoxx 50 fell to a 6-1/2 month low and is down -2.10%. China's Shanghai Composite fell to a 5-3/4 month low and closed down -1.54%. Japan's Nikkei Stock 225 fell to a 9-month low and closed down sharply by -12.40%.
Interest Rates
September 10-year T-notes (ZNU24) today are up by +7 ticks. The 10-year T-note yield is down -2.1 bp to 3.770%. Sep T-notes today rallied to a 14-1/2 month nearest-futures high, and the 10-year T-note yield fell to a 14-month low of 3.665%. Today’s sharp selloff in global equity markets has sparked safe-haven demand for T-notes. Also, recent weaker-than-expected US economic news has bolstered the odds for deeper Fed rate cuts as the swaps market has fully priced in a 50 bp rate cut at the September 17-18 FOMV meeting. In addition, a slide in inflation expectations is boosting T-note prices as the 10-year breakeven inflation rate fell to a 3-1/2 year low today at 1.932%.
T-note prices fell back from their best levels today after the US Jul ISM services index rose more than expected. Also, comments from Chicago Fed President Goolsbeee weighed on T-notes when he said US economic growth continues at a "fairly steady level."
European government bond yields today are moving lower. The 10-year German bund yield dropped to a 7-month low of 2.078% and is down -1.1 bp at 2.163%. The 10-year UK gilt yield fell to a 6-month low of 3.742% and is down -0.1 bp at 3.827%.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 100% for the September 12 meeting.
US Stock Movers
Megacap technology stocks are falling sharply today, weighing on the overall market. Alphabet (GOOGL), Meta Platforms (META), Microsoft (MSFT), Tesla (TSLA), and Amazon.com (AMZN) are down more than -2%.
Nvidia (NVDA) is down more than -7% to lead losers in the Nasdaq 100 following a report that the company’s upcoming artificial intelligence chips will be delayed due to design flaws.
Chip stocks are slumping today and are weighing on the overall market. Intel (INTC) is down more than -7% to lead losers in the Dow Jones Industrials. Also, ARM Holdings Plc (ARM) is down more than -7%, and Micron Technology (MU) is down more than -5%. In addition, Broadcom (AVGO) is down more than -3%, and Marvell Technology (MRVL) and Analog Devices (ADI) are down more than -2%.
Apple (AAPL) is down more than -5% after Berkshire Hathaway reported Saturday that it had cut its stake in the company by almost 50% in Q2.
Cryptocurrency-related stocks are falling today, with the price of Bitcoin down more than -12% to a 5-1/2 month low. As a result, Coinbase Global (COIN), Marathon Digital (MARA), MicroStrategy (MSTR), and Riot Platforms (RIOT) are down more than -3%.
Mining stocks are sliding today, with copper prices falling to a 4-1/2 month low and silver prices tumbling to a 3-month low. As a result, Newmont (NEM) and Freeport McMoRan (FCX) are down more than -4%.
Recession concerns are undercutting travel and casino stocks. Caesars Entertainment (CZR) is down more than -8% to lead losers in the S&P 500. Also, Norwegian Cruise Line Holdings (NCLH) and Wynn Resorts (WYNN) are down more than 5%. In addition, Delta Air Lines (DAL), United Airlines Holdings (UAL), MGM Resorts International (MGM), Carnival (CCL), and Southwest Airlines (LUV) are down more than -4%.
Moderna (MRNA) is down more than -4% after RBC Capital Markets downgraded the stock to sector perform from outperform, citing an “increasingly uncertain outlook.”
Kellanova (K) is up more than +12% to lead gainers in the S&P 500 after Reuters reported that Mars was exploring an acquisition of the company.
Tyson Foods (TSN) is up more than +2% after reporting Q3 adjusted EPS of 97 cents, well above the consensus of 67 cents.
Sotera Health (SHC) is up more than +10% after reporting Q2 adjusted EPS of 19 cents, stronger than the consensus of 16 cents.
Welltower (WELL) is up more than +1% after Mizuho Securities raised its price target on the stock to $125 from $100.
Earnings Reports (8/5/2024)
CSX Corp (CSX), Diamondback Energy Inc (FANG), ONEOK Inc (OKE), Realty Income Corp (O), Simon Property Group Inc (SPG), Tyson Foods Inc (TSN), Williams Cos Inc/The (WMB).
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.
