Weakness in Chip Stocks Leads the Broader Market Lower

Rich Asplund - Barchart - Tue Mar 19, 9:18AM CDT

The S&P 500 Index ($SPX) (SPY) this morning is down -0.28%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.10%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.78%.

Stocks this morning are mixed. The broader market is under pressure from weakness in chip stocks after analysts said Nvidia’s much-anticipated AI event on Monday had no major surprise announcements. Also, Super Micro Computer is down more than -11% after it announced a share offering. Stocks remained lower after US Feb housing starts and building permits rose more than expected, hawkish factors for Fed policy.

The markets are focused on the 2-day FOMC meeting that begins today. The markets expect the Fed to leave its 5.25%-5.50% federal funds target range unchanged, and they will look to newly updated Fed projections (dot-plot) for the outlook for interest rate cuts. The markets will also scour comments from Fed Chair Powell’s press conference after Wednesday's conclusion of the FOMC meeting for the future direction of Fed policy.

US Feb housing starts rose +10.7% m/m to 1.521 million, stronger than expectations of 1.440 million. Feb building permits, a proxy for future construction, rose +1.9% m/m to a 6-month high of 1.518 million, stronger than expectations of 1.496 million.

Bitcoin (^BTCUSD) is down more than -5% at a 2-week low on signs of long liquidation pressures. The Grayscale Bitcoin Trust, the world’s biggest exchange-traded fund (ETF) for Bitcoin, posted a $643 million outflow on Monday, the most since it converted to an ETF on Jan 11.

The markets are discounting the chances for a -25 bp rate cut at 1% for the Tue/Wed FOMC meeting, 9% for the following meeting on April 30-May 1, and 60% for the meeting after that on June 11-12.

Today, the Bank of Japan (BOJ) voted 7-2 to scrap its yield curve control program and end negative interest rates as it set a new policy rate range between 0% and 0.1%, shifting from a -0.1% short-term interest rate. The BOJ also pledged to continue buying long-term government bonds as needed but ended purchases of exchange-traded funds. Despite the BOJ’s interest rate hike, the yen tumbled to a 2-week low against the dollar after BOJ Governo Ueda said the BOJ will still maintain an accommodative policy stance.

Overseas stock markets today are mixed. The Euro Stoxx 50 is up +0.16%. China's Shanghai Composite closed down -0.72%. Japan's Nikkei Stock Index closed up +0.66%.

Interest Rates

June 10-year T-notes (ZNM24) this morning are up +5 ticks. The 10-year T-note yield is down -1.2 bp to 4.312%. June T-notes this morning are moderately higher on carryover support from strength in European government bonds. Gains are limited after this morning’s stronger-than-expected reports on US Feb housing starts and building permits. Also, supply pressures are negative for T-notes as the Treasury will auction $13 billion of 20-year T-bonds this afternoon.

European government bond yields today are lower. The 10-year German bund yield is down -1.7 bp at 2.442%. The 10-year UK gilt yield is down -3.7 bp at 4.052%.

Eurozone Q4 labor costs eased to +3.4% y/y from +5.2% y/y in Q3.

The German Mar ZEW expectations of economic growth survey rose +11.8 to a 2-year high of 31.7, stronger than expectations of 20.5.

ECB Vice President Guindos said, "The ECB hasn't yet discussed anything about future rate moves. The evolution of wages is key, and in June, we will also have our new projections and be ready to decide when to adjust our policy stance based on the data we see."

US Stock Movers

Super Micro Computer (SMCI) is down more than -11% to lead losers in the S&P 500 after offering to sell 2 million shares of common stock in a public offering.

Semiconductors stocks are under pressure and are leading technology stocks lower, with Nvidia (NVDA) down more than -2% after analysts said the company’s much-anticipated AI event on Monday had no major surprise announcements. Also, Advanced Micro Devices (AMD) is down more than -4% to lead losers in the Nasdaq 100. In addition, Marvell Technology (MRVL) is down more than -4%, and KLA Corp (KLAC), Texas Instruments (TXN), GlobalFoundries (GFS), Micron Technology (MU), Lam Research (LRCX), and Microchip Technology (MCHP) are down more than -1%. Finally, Intel (INTC) is down more than -1% to lead losers in the Dow Jones Industrials.

StoneCo (STNE) is down more than -6% after it announced its co-founder Andre Street would leave his position as chairman.

Snowflake (SNOW) and MongoDB (MDB) are down more than -2% after Redburn downgraded the stocks to sell from neutral, saying the companies “lack a clear” advantage on generative artificial intelligence.

Cryptocurrency-linked stocks are under pressure today, with the price of Bitcoin down more than -5% at a 2-week low. As a result, Coinbase Global (COIN), MicroStrategy (MSTR), Marathon Digital (MARA), and Riot Platforms (RIOT) are down more than -5%.

Dlocal Ltd (DLO) is down more than -13% after reporting Q4 EPS of 10 cents, well below the consensus of 15 cents.

Caleres (CAL) is down more than -2% after forecasting full-year consolidated net sales to be flat to up 2%, weaker than the consensus of up +2%.

International Paper (IP) is up more than +7% to lead gainers in the S&P 500 after it announced Andres Silvernail, former executive adviser at KKR, to succeed Mark Sutton as CEO, effective May 1.

Home Depot (HD) is up nearly +1% to lead gainers in the Dow Jones Industrials after Mizuho Securities initiated coverage of the stock with a recommendation of buy and a price target of $415.

Fusion Pharmaceuticals (FUSN) is up more than +98% after AstraZeneca agreed to buy the company for as much as $2.4 billion, or $21 a share.

Etsy (ETSY) is up more than +3% after Truist Securities said, “a pickup in order frequency in Jan/Feb reflect healthy fundamentals despite the macro environment, positioning Etsy well for when the economy normalizes.”

Inspire Medical Systems (INSP) is up more than +2% after Morgan Stanley initiated coverage of the stock with a recommendation of overweight and a price target of $250.

Crinetics Pharmaceuticals (CRNX) is up more than +16% after saying its once-daily oral paltusotine treatment for acromegaly patients achieved the primary and all secondary endpoints in a Phase 3 study.

Ansys (ANSS), Cadence Design Systems (CDNS), and Synopsys (SNPS) are up more than +1% after Nvidia said the companies will use its new Blackwell-based processors.

Earnings Reports (3/19/2024)

Smartsheet Inc (SMAR), Core & Main Inc (CNM), Design Therapeutics Inc (DSGN), Harrow Inc (HROW), HealthEquity Inc (HQY), Mitek Systems Inc (MITK), Precigen Inc (PGEN), Terawulf Inc (WULF), Waldencast plc (WALD).

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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.