What you need to know…
The S&P 500 Index ($SPX) (SPY) on Tuesday closed down -0.57%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.07%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.68%.
Stocks on Tuesday settled mixed, with the S&P 500 falling to a 1-week low and the Nasdaq 100 dropping to a 2-week low. A sell-off in technology stocks on Tuesday weighed on the overall market. Apple fell more than -3% after Barclays downgraded it to underweight due to concern about iPhone demand. Also, chip stocks retreated Tuesday after Bloomberg News reported that ASML Holding NV canceled some shipments of its chip-making machines to China at the request of the Biden administration.
Higher bond yields also weighed on stocks as the 10-year T-note yield rose to a 2-week high. Strength in pharmaceutical stocks Tuesday lifted the Dow Jones Industrials into positive territory.
Tuesday’s U.S. economic news was bearish for stocks after the Dec S&P manufacturing PMI was unexpectedly revised lower to a 6-month low of 47.9 versus expectations of an upward revision to 48.4. Also, Nov construction spending rose +0.4% m/m, weaker than expectations of +0.6% m/m.
An escalation of tensions in the Middle East is negative for stocks after Iran dispatched a warship into the Red Sea after the U.S. Navy said it was fired upon when responding to a distress call from a vessel in the Red Sea. On Sunday, the U.S. Navy sank three Houthi boats in the Red Sea after they fired on U.S. aircraft.
The price of Bitcoin (^BTCUSD) rose more than +2% to a 21-month high in anticipation that the U.S. SEC will soon approve a spot Bitcoin exchange-traded fund (ETF).
The markets are discounting the chances for a -25 bp rate cut at 11% at the next FOMC meeting on Jan 30-31 and 88% for that same -25 bp rate cut for the following meeting on March 19-20.
U.S. and European government bond yields on Tuesday moved higher. The 10-year T-note yield climbed to a 2-week high of 3.971% and finished up +6.2 bp at 3.941%. The 10-year German bund yield rose to a 2-week high of 2.112% and finished up +4.3 bp at 2.068%. The 10-year UK gilt yield rose to a 2-week high of 3.692% and finished up +10.1 bp at 3.638%.
Overseas stock markets on Tuesday settled lower. The Euro Stoxx 50 closed down -0.20%. China’s Shanghai Composite Index closed down -0.43%. Japan’s Nikkei Stock Index was closed for the New Year’s holiday.
Today’s stock movers…
Chip stocks retreated due to higher bond yields and after Bloomberg News reported that ASML Holding canceled some shipments of its chip-making machines to China at the request of the Biden administration. As a result, Advanced Micro Devices (AMD) closed down more than -6% to lead losers in the Nasdaq 100, and Intel (INTC) closed down more than -5% to lead losers in the Dow Jones Industrials. Also, ASML Holding NV (ASML) and Applied Materials (AMAT) closed down more than -5%. In addition, Globalfoundries (GFS), Lam Research (LRCX), Marvel Technology (MRVL), Micron Technology (MU), NXP Semiconductors NV (NXPI), and KLA Corp (KLAC) closed down more than -4%.
Apple (AAPL) closed down more than -3% after Barclays downgraded the stock to underweight from equal weight with a price target of $160.
Software stocks fell Tuesday and undercut the overall market. Cadence Design Systems (CDNS) and Autodesk (ADSK) fell more than -3%. Also, Tyler Technologies (TYL), Ansys Inc (ANSS), and Adobe (ADBE) closed down more than -2%.
Cruise line operators were under pressure Tuesday, with Norwegian Cruise Line Holdings (NCLH) closing down more than -8% to lead losers in the S&P 500. Also, Carnival (CCL) and Royal Caribbean Cruises Ltd (RCL) closed down more than -6%.
Corcept Therapeutics (CORT) closed down more than -25% after a U.S. federal court ruled the company failed to meet its burden of proof in a patent infringement case against Teva for planning to sell a copycat version of Corcept’s Korlym.
Unity Software (U) closed down more than -5% after Piper Sander downgraded the stock to underweight from neutral.
Hasbro (HAS) closed down more than -2% after D.A. Davidson downgraded the stock to neutral from buy.
Ball Corp (BALL) closed down -1% after Bank of America Global Research downgraded the stock to underperform from neutral.
Moderna (MRNA) closed up more than +13% to lead gainers in the S&P 500 and Nasdaq 100 after Oppenheimer upgraded the stock to outperform from market perform.
Casino stocks with exposure to Macau rallied Tuesday after Macau’s Dec casino revenue surged +433.3% y/y, above the consensus of +402%. As a result, Las Vegas Sands (LVS) closed up more than +4%, Wynn Resorts (WYNN) closed up more than +3%, and MGM Resorts International (MGM) closed up more than +1%.
Defensive pharmaceutical stocks pushed higher Tuesday as the broader stock market declined. Viatris (VTRS) closed up more than +5%, and Merck & Co (MRK) closed up more than +3% to lead gainers in the Dow Jones Industrials. Also, Amgen (AMGN), AbbVie (ABBV), Pfizer (PFE), and Regeneron Pharmaceuticals (REGN) closed up more than +3%.
Centene (CNC) closed up more than +3% after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $90.
Tapestry (TPR) closed up more than +3% after JPMorgan Chase raised its price target on the stock to $46 from $41.
Citigroup (C) closed up more than +3% after Wells Fargo Securities raised their price target on the stock to $70 from $60.
Across the markets…
March 10-year T-notes (ZNH24) on Tuesday closed down -19 ticks, and the 10-year T-note yield rose by +6.2 bp to 3.941%. Mar T-notes Tuesday fell to a 2-week low, and the 10-year T-note yield rose to a 2-week high of 3.971%. T-notes moved lower on negative carryover from a slide in European government bonds to 2-week lows. Also, an increase in corporate issuance has prompted bond dealers to short T-notes to hedge against the incoming supply, with as many as 15 companies issuing debt securities on Tuesday. In addition, an increase in inflation expectations was bearish for T-notes after the 10-year breakeven inflation rate Tuesday rose to a 2-week high of 2.219%.
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.
