What you need to know…
The S&P 500 Index ($SPX) (SPY) Tuesday closed down -0.42%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.45%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.87%.
Stocks on Tuesday closed moderately lower but well off their lows after regional bank stocks recovered from their worst levels. The S&P 500 fell to a 3-1/2 week low, the Dow Jones Industrials fell to a 2-1/2 week low, and the Nasdaq 100 dropped to a 4-week low. Regional bank stocks moved lower Tuesday and weighed down the overall market after Moody’s Investors Service cut ratings for ten small and midsize U.S. banks and adopted a "negative" outlook for 11 other lenders.
Stocks were also undercut by concern about the global economy after news that China’s exports and imports in July fell more than expected. China Jul exports fell -14.5% y/y, weaker than expectations of -13.2% y/y and the biggest decline in nearly 3-1/2 years. Also, Jul imports fell -12.4% y/y, weaker than expectations of -5.6% y/y and the biggest decline in 6 months.
A slump in European stocks Tuesday also undercut U.S. stocks. The Euro Stoxx 50 dropped to a 4-week low Tuesday as Italian bank stocks sold off after the Italian government unexpectedly unveiled a new tax on bank profits.
A supportive factor for stocks was Tuesday’s a dovish comment from Philadelphia Fed President Harker, who said, "Absent any alarming new data between now and mid-September, I believe we may be at the point where we can be patient and hold interest rates steady and let the monetary policy actions we have taken do their work."
Moody's Investors Service lowered credit ratings for ten small and midsize U.S. banks and adopted a "negative" outlook for 11 other lenders, saying rising funding costs and declining income metrics will erode profitability, the first buffer against losses. Also, asset risk is rising, in particular for small and midsize banks with large corporate real estate (CRE) exposures."
The U.S. Jun trade deficit shrank to -$65.5 billion from -$68.3 billion in May but still showed a larger deficit than expectations of -$65.0 billion.
The markets are discounting the odds at 12% for a +25 bp rate hike at the September 20 FOMC meeting and 34% for a +25 bp rate hike at the November 1 FOMC meeting.
Global bond yields Tuesday moved lower. The 10-year T-note yield fell to a 1-week low of 3.982% and finished down -7.1 bp at 4.018%. The 10-year German bund yield fell to a 1-week low of 2.440% and finished down -13.2 bp at 2.469%. The 10-year UK gilt yield fell to a 1-week low of 4.331% and finished down -7.6 bp at 4.385%.
Overseas stock markets Tuesday settled mixed. The Euro Stoxx 50 closed down -1.12%. China’s Shanghai Composite Index today closed down -0.25%. Japan’s Nikkei Stock Index closed up +0.38%.
Today’s stock movers…
International Flavors & Fragrances (IFF) closed down more than -19% to lead losers in the S&P 500 after reporting Q2 net sales of $2.93 billion, weaker than the consensus of $3.08 billion, and cutting its full-year sales forecast to $11.3 billion-$11.6 billion from a previous forecast of about $12.3 billion, below the consensus of $12.17 billion.
Sealed Air Corp (SEE) closed down more than -9% after reporting Q2 net sales of $1.38 billion, weaker than the consensus of $1.42 billion, and cut its full-year net sales forecast to $5.40 billion-$5.60 billion from a previous estimate of $5.85 billion-$6.10 billion.
Insulet Corp (PODD) closed down more than -8% after the company said it filed suit alleging Misappropriation and Infringement of Intellectual Property Rights and Unfair Competition against EOFlow Co. Ltd.
Expeditors International of Washington (EXPD) closed down more than -4% after reporting Q2 revenue of $2.24 billion, well below the consensus of $2.59 billion.
U.S. regional bank stocks were under pressure after Moody’s Investors Service lowered credit ratings for ten small and midsize U.S. banks and adopted a "negative" outlook for 11 other lenders. As a result, Huntington Bancshares (HBAN) closed down more than -2%. Also, Fifth Third Bancorp (FITB), PNC Financial Services Group (PNC), Citizens Financial Group (CFG), M&T Bank (MTB), Northern Trust (NTRS), Franklin Resources (BEN), Bank of New York Mellon (BK), and Cincinnati Financial Corp (CINF) closed down more than -1%.
Datadog (DDOG) closed down more than -17% to lead losers in the Nasdaq 100 after cutting its full-year revenue forecast to $2.05 billion-$2.06 billion from a previous forecast of $2.08 billion-$2.10 billion, weaker than the consensus of $2.09 billion.
Beyond Meat (BYND) closed down more than -14% after reporting Q2 net revenue of $102.1 million, below the consensus of $108.5 million, and cutting its full-year net revenue forecast to $360 million-$380 million from a previous estimate of $375 million-$415 million, weaker than the consensus of $388.1 million.
Willis Towers Watson Plc (WTW) closed down more than -3% after BMO Capital Markets downgraded the stock to underperform from market perform.
Salesforce (CRM) closed down more than -2% to lead losers in the Dow Jones Industrials on signs of insider selling after an SEC filing showed CEO Benioff sold $3.23 million of shares last Friday.
Eli Lilly (LLY) closed up more than +14% to lead gainers in the S&P 500 after reporting Q2 revenue of $8.31 billion, stronger than the consensus of $7.58 billion, and raising its full-year revenue estimate to $33.4 billion-$33.9 billion from a prior estimate of $31.2 billion-$31.7 billion.
Organon (OGN) closed up more than +9% after reporting Q2 revenue of $1.61 billion, better than the consensus of $1.57 billion, and raising the lower end of its full-year revenue estimate to $6.25 billion-$6.45 billion from a previous estimate of $6.15 billion-$6.45 billion.
Broadridge Financial Solutions (BR) closed up more than +6% after reporting Q4 adjusted EPS of $3.21, stronger than the consensus of $3.11.
Fox Corp (FOXA) closed up more than +5% after reporting Q4 adjusted Ebitda of $735 million, well above the consensus of $674 million.
Lucid Group (LCID) closed up more than +12% to lead gainers in the Nasdaq 100 after it said it would produce at least 10,000 vehicles this year.
Jacobs Solutions (J) closed up more than +4% after reporting Q3 revenue of $4.20 billion, well above the consensus of $3.84 billion.
Bio-Techne (TECH) closed up more than +3% after reporting Q4 adjusted EPS of 55 cents, better than the consensus of 54 cents.
Duke Energy (DUK) closed up more than +2% after reporting Q2 operating revenue of $6.58 billion, above the consensus of $6.40 billion.
Across the markets…
September 10-year T-notes (ZNU23) Tuesday closed up +9 ticks, and the 10-year T-note yield fell -7.1 bp to 4.018%. Sep T-notes Tuesday climbed to a 1-week high, and the 10-year T-note yield fell to a 1-week low of 3.982%. A decline in the ECB’s consumer inflation expectations survey helped knock the 10-year German bund yield to a 1-week low Tuesday and provided carryover support to T-notes. Also, bank jitters weighed on stocks and boosted safe-haven demand for T-notes after Moody’s Investors Service cut ratings for ten small and midsize U.S. banks and adopted a "negative" outlook for 11 other lenders.
T-notes maintained moderate gains Tuesday on dovish comments from Philadelphia Fed President Harker, who said the Fed may be at the point where it can hold interest rates steady. Also, strong demand for the Treasury’s $42 billion auction of 3-year T-notes supported T-note prices as the auction had a bid-to-cover ratio of 2.90, well above the 10-auction average of 2.67.
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.
