Stocks Slump as Tech Stock Weakness Weighs on the Overall Market

Rich Asplund - Barchart - Fri Sep 15, 2023

What you need to know…

The S&P 500 Index ($SPX) (SPY) Friday closed down -1.22%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.83% and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.75%.

Stocks on Friday closed moderately lower, with the S&P 500 and Nasdaq 100 posting 1-week lows. An increase in T-note yields on Friday undercut technology stocks and weighed on the overall market. Also, chipmaker stocks were under pressure after Reuters reported that Taiwan Semiconductor Manufacturing Co asked its major suppliers to delay shipment of high-end chipmaking equipment. Stocks extended their losses Friday after the University of Michigan U.S. Sep consumer sentiment fell more than expected.

Friday’s quarterly triple witching options event may have added fuel to the decline in stocks. Derivatives contracts tied to stocks, index options, and futures for September expired on Friday, prompting traders to roll over their existing positions or start new ones.

A positive factor for stocks Friday was signs that China’s economy rebounded in August after consumer spending and factory output strengthened. China Aug industrial production rose +4.5% y/y, stronger than expectations of +3.9% y/y and the biggest increase in 4 months. Also, China Aug retail sales rose +4.6% y/y, stronger than expectations of +3.0% y/y.

Bank of America said EPFR Global data shows investors poured $26.4 billion into U.S. equities in the week ended September 13, the biggest weekly inflow since March 2022. Also, global stocks attracted $25.3 billion of inflows.

The U.S. import price index ex-petroleum was unchanged m/m for a second month, right on expectations.

The U.S. Sep Empire manufacturing survey general business conditions rose +20.9 to 1.9, stronger than expectations of -10.0.

The University of Michigan U.S. Sep consumer sentiment fell -1.8 to 67.7, weaker than expectations of 69.0.

The University of Michigan U.S. Sep 1-year inflation expectations unexpectedly eased to a 2-1/2 year low of 3.1%, better than expectations of no change at 3.5%. Also, the Sep 5-10-year inflation expectations eased to a year low of 2.7%, better than expectations of no change at 3.0%.

The markets are discounting the odds at 4% for a +25 bp rate hike at the September 20 FOMC meeting and 33% for that +25 bp rate hike at the November 1 FOMC meeting.

Global bond yields Friday moved higher. The 10-year T-note yield rose +3.6 bp to 4.322%. The 10-year German bund yield rose +8.2 bp to 2.675%. The 10-year UK gilt yield rose +7.7 bp to 4.358%.

Overseas stock markets Friday settled mixed. The Euro Stoxx 50 closed +0.36%. China’s Shanghai Composite Index closed -0.28%. Japan’s Nikkei Stock Index closed +1.10%.

Today’s stock movers…

Nucor (NUE) closed down more than -6% to lead losers in the S&P 500 after reporting Q3 preliminary EPS of $4.10-$4.20, weaker than the consensus of $4.56.

Dexcom (DXCM) closed down more than -5% after Raymond James cut its price target on the stock to $131 from $154.

Chip stocks retreated Friday after Reuters reported that Taiwan Semiconductor Manufacturing Co asked its major suppliers to delay shipment of high-end chipmaking equipment. As a result, KLA Corp (KLAC) and Lam Research (LRCX) closed down more than -5%. Also, Applied Materials (AMAT), ASML Holding NV (ASML), Advanced Micro Devices (AMD), and Globalfoundries (GFS) closed down more than -4%. In addition, Nvidia (NVDA), ON Semiconductor (ON), and Microchip Technology (MCHP) closed down more than -3%.

Adobe (ADBE) closed down more than -4% after reporting Q3 earnings results that beat expectations but gave an outlook that analysts see as conservative.

Insulet (PODD) closed down more than -2% to lead losers in the S&P 500 after Raymond James cut its price target on the stock to $228 from $299.

Homebuilders moved lower after Lennar forecast Q4 new orders of 16,200 to 17,200, the midpoint below the consensus of 16,591. As a result, Toll Brothers (TOL) and PulteGroup (PHM) closed down more than -3%, and Lennar (LEN) and DR Horton (DHI) closed down more than -2%.

DoorDash (DASH) closed down more than -2% after MoffettNathanson downgraded the stock to market perform from outperform.

Charles Schwab (SCHW) closed down more than -2% after reporting August client assets of $8.09 trillion, down -2% from July.

Truist Financial (TFC) closed down more than -1% after Piper Sandler downgraded the stock to neutral from overweight.

Walt Disney (DIS) closed up more than +1% to lead gainers in the Dow Jones Industrials after Bloomberg reported the company had held exploratory talks about selling its ABC network and TV stations to Nexstar Media Group.

Moderna (MRNA) closed up more than +1% to lead gainers in the Nasdaq 100 after the UK’s Medicines and Healthcare Products Regulatory Agency approved the company’s Covid-19 vaccine Spikevax.

Host Hotels & Resorts (HST) closed up more than +2% after the company raised its regular quarterly cash dividend to 18 cents per share, above forecasts of 15 cents.

AT&T (T) closed up more than +1%, adding to Thursday’s +2% gain after it said it is confident in its full-year guidance and expects Q3 free cash flow in the range of $4.5 billion-$5.0 billion.

JB Hunt Transport Services (JBHT) closed up more than +1% after it announced that it had entered into a definitive agreement to buy the brokerage operations of BNSF Logistics LLC.

Warner Bros Discovery (WBD) closed up nearly +1% after the CFO said the company is looking at potential sales of some of its “non-core” assets and that it expects to raise prices on monthly Max subscriptions.

Across the markets…

December 10-year T-notes (ZNZ23) on Friday closed down -7.5 ticks, and the 10-year T-note yield rose +3.6 bp to 4.322%. T-notes were under pressure Friday on negative carryover from a fall in European government bonds after hawkish ECB comments pushed European bond yields higher. Also, Friday’s stronger-than-expected U.S. economic news on Sep Empire manufacturing activity and Aug industrial production was bearish for T-notes. Prices recovered from their worst levels after the University of Michigan Sep consumer sentiment and inflation expectations fell more than expected.

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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.