Stocks Slip on a Slump in Disney and Higher Bond Yields

Rich Asplund - Barchart - Wed Nov 9, 2022

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is down -0.61%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.58%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.84%. Stock indexes this morning are moderately lower as an -11% plunge in Walt Disney and a drop of more than -6% in News Corp is weighing on the overall market after both companies reported disappointing quarterly earnings results. Also, higher T-note yields are bearish for stocks, with the 10-year T-note yield up +4.4 bp at 4.168%. The markets are still waiting for various election results that will determine control of the House and Senate.

A sell-off in cryptocurrencies deepened today, with Bitcoin down more than -5% at a 2-year low. Bitcoin and other cryptocurrencies plunged Tuesday after crypto exchange Binance bought rival FTX.com, which sparked an exodus of investors from cryptocurrencies on liquidity concerns about FTX.com.

Today’s U.S. economic news was slightly bearish for stocks after Sep wholesale trade sales rose +0.4% m/m, weaker than expectations of +0.5 m/m.

Signs of stress in corporate earnings are showing as Bloomberg data show 111 of the 453 S&P 500 companies that have reported earnings so far this season failing to meet forecasts. Meanwhile, 12-month blended forward estimates for company profits have fallen -2.7% since mid-September.

On the positive side, Meta Platforms is up more than +7% today after CEO Zuckerberg announced 11,000 job cuts and said the company would extend its hiring freeze through Q1.

Today’s stock movers…

Walt Disney (DIS) is down more than -11% today to lead losers in the S&P 500 and Dow Jones Industrials after reporting Q4 revenue of $20.15 billion, well below the consensus of $21.26 billion.

News Corp (NWSA) is down more than -6% after reporting Q1 Ebitda of $350.0 million, weaker than the consensus of $355.3 million.

Lucid Group (LCID) is down more than -12% to lead losers in the Nasdaq 100 after reporting Q3 revenue of $195.5 million, below the consensus of $204.0 million. Also, the company saw its order book in Q3 shrink for the first time as cancellations exceeded new orders by about 1,600 units.

Zoom Video Communications (ZM) is down more than -7% after Stifel cut its price target on the stock to $80 from $90.

U.S.-listed Chinese stocks are falling today on concern China will maintain or expand its pandemic lockdowns and restrictions after it reported 7,740 new Covid infections on Tuesday, the most in over 6 months. Pinduoduo (PDD), JD.com (JD), and Baidu (BIDU) are down more than -4%. Also, Alibaba Group Holding (BABA) and NetEase (NTES) are down more than -2%

Meta Platforms (META) is up more than +7% today to lead gainers in the S&P 500 and Nasdaq 100 after CEO Zuckerberg announced 11,000 job cuts and said the company would extend its hiring freeze through Q1.

Homebuilders are moving higher today after DR Horton reported Q3 purchase contracts of 13,582, above the consensus of 13,320. As a result, DR Horton (DHI) is up more than +5%. Also, Lennar (LEN) is up more than +4%, and PulteGroup (PHM) is up more than +3%. In addition, Toll Brothers (TOL) is up more than +2%.

Akamai Technologies (AKAM) is up more than +4% after reporting Q3 revenue of $882 million, stronger than the consensus of $875.2 million.

General Digital (GEN) is up more than +4% after reporting Q2 revenue of $748.0 million, better than the consensus of $721.5 million.

Kroger (KR) is up more than +3% after Evercore ISI upgraded the stock to outperform.

Across the markets…

Dec 10-year T-notes (ZNZ22) this morning are down by -5 ticks, and the 10-year T-note yield is up +4.4 bp at 4.168%. Supply pressures are weighing on T-note prices this morning. An increase in corporate bond issuance has prompted some bond dealers to short T-note futures as a hedge after a six-part GE Healthcare bond deal was announced today. Also, the November refunding continues today as the Treasury will auction $35 billion of 10-year T-notes early this afternoon.

The dollar index (DXY00) this morning is up by +0.61%. Higher T-note yields today have strengthened the dollar’s interest rate differentials and are bullish for the dollar. Also, the weakness in stocks today has boosted the liquidity demand for the dollar. In addition, weakness in the yuan is supportive of the dollar. The yuan fell on concern China will have to maintain or expand pandemic lockdowns after new Covid infections in China climbed to a new 6-month high Tuesday.

EUR/USD (^EURUSD) today is down by -0.56%. The euro is under pressure today from economic concerns after the German government forecasted the German economy would shrink by -0.2% next year due to the “massive” burden on households and companies from soaring energy costs and inflation. Also, German Chancellor Scholz’s economic advisers more than doubled their inflation projection for Germany next year to +7.4% from +3.4%.

USD/JPY (^USDJPY) today is up by +0.53%. The yen today fell back from a 1-1/2 week high against the dollar and is moderately lower. Higher T-note yields today are undercutting the yen. Also, weaker-than-expected Japanese economic news was bearish for the yen after the Japan Oct eco watchers survey outlook unexpectedly fell -2.8 to 46.4, weaker than expectations of an increase to 50.1.

December gold (GCZ2) this morning is up +2.4 (+0.14%), and December silver (SIZ22) is up +0.058 (+0.27%). Precious metals prices this morning shook off early losses and are slightly higher. Rising Covid infections in China are boosting safe-haven demand for precious metals after China reported 7,740 new Covid infections on Tuesday, the most in more than six months. Precious metals prices lack direction today as they await U.S. October consumer price data on Thursday. Gold prices this morning initially moved lower due to a stronger dollar and higher bond yields. Gold continues to be undercut by fund liquidation as long positions in gold ETF’s dropped to a new 2-1/2 year low Monday.

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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.