What you need to know…

The S&P 500 Index ($SPX) (SPY) Friday closed down -0.01%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.07%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.14%.

Stocks on Friday settled mixed, with the S&P 500 falling to a 1-1/2 month low and the Nasdaq 100 dropping to a 2-month low.  Stocks were under pressure Friday as worries about China’s economy and higher global interest rates dampened market sentiment. However, stocks recovered most of their losses and settled mixed as the ability of bond yields to remain lower the entire day sparked a short covering rally in stocks Friday afternoon. 

Stock trading was volatile Friday due to the options expiration of August contracts.  According to an estimate from analytical firm Asym 500, some $2.2 trillion of longer-dated contracts are tied to stocks and stock indexes scheduled to mature today.

Bank of America warned that U.S. equities could drop another 4% as the economic turmoil in China spooks global investors and bond yields surge.  Also, Barclays said, “Markets are being hit by a perfect storm amid surging rates, worsening data in China, and poor summer liquidity.” 

The markets are discounting the odds at 10% for a +25 bp rate hike at the September 20 FOMC meeting and 36% for that +25 bp rate hike at the November 1 FOMC meeting. 

Global bond yields Friday moved lower.  The 10-year T-note yield fell -2.1 bp to 4.253%.  The 10-year German bund yield fell -8.7 bp to 2.622%.  The 10-year UK gilt yield fell -7.1 bp to 4.675%. 

Overseas stock markets Friday settled lower.  The Euro Stoxx 50 closed down -0.35%.  China’s Shanghai Composite Index closed down -1.00%. Japan’s Nikkei Stock Index closed down -0.55%.

Today’s stock movers…

Ross Stores (ROST) closed up more than +5% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q2 EPS of $1.32, better than the consensus of $1.16, and forecasting Q3 EPS of $1.16-$1.21, stronger than the consensus of $1.15.

Applied Materials (AMAT) closed up more than +3% after reporting Q3 net sales of $6.43 billion, above the consensus of $6.16 billion, and forecasting Q4 net sales of about $6.51 billion, well above the consensus of $5.88 billion.

Walmart (WMT) closed up more than +1% to lead gainers in the Dow Jones Industrials after UBS raised its price target on the stock to $190 from $173.

Dolby Laboratories (DLB) closed up more than +10% after S&P Dow Jines Indices said the company would replace Staar Surgical in the S&P MidCap 400 before the opening of trading on Aug 22. 

Bloomin’ Brands (BLMN) closed up more than +8% after the Wall Street Journal reported that Starboard Value has built a stake of more than 5% in the company, making it one of Bloomin’ Brands top-five shareholders. 

Datadog (DDOG) closed up more than +2% after Cowen initiated coverage on the stock with an outperform rating and a price target of $120.

Regeneron Pharmaceuticals (REGN) closed up more than +1% after saying the FDA has approved its monoclonal antibody Veopoz to treat CHAPLE disease in children and adults. 

Keysight Technologies (KEYS) closed down more than -13% to lead losers in the S&P 500 after forecasting Q4 revenue of $1.29 billion-$1.31 billion, weaker than the consensus of $1.39 billion. 

Deere & Co (DE) closed down more than -5% despite raising guidance for full-year earnings on concern the market has peaked for agricultural machinery purchases. 

Estee Lauder (EL) closed down more than -3% after reporting Q4 adjusted gross margin of 67.8%, below the consensus of 68.5%. 

U.S.-listed Chinese stocks retreated Friday on concern about China’s property crisis and troubles in its shadow banking system. As a result, JD.com (JD) closed down more than -4% to lead losers in the Nasdaq 100.  Also, PDD Holdings (PDD) and Baidu (BIDU) closed down more than -3%.  In addition, Alibaba Group Holding (BABA) and NetEase (NTES) closed down more than -2%. 

Mining stocks were under pressure on concerns the faltering Chinese economy would curb the country’s demand for industrial metals. As a result, Southern Copper (SCCO) closed down more than -3%.  Also, Freeport-McMoRan (FCX) and Newmont (NEM) closed down more than -1%. 

Across the markets…

September 10-year T-notes (ZNU23) Friday closed up +11.5 ticks, and the 10-year T-note yield fell -2.1 bp to 4.253%.  Sep T-notes Friday posted moderate gains and garnered some carryover support from a rally in European government bonds.  Also, weakness in global equity markets Friday on concerns about China’s faltering economy boosted safe-haven demand for T-notes.

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