What you need to know…
The S&P 500 Index ($SPX) (SPY) today is down -0.75%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.04%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.77%.
Stocks this morning are lower, with the S&P 500 falling to a 1-week low and the Nasdaq 100 dropping to a 2-week low. Weakness in technology stocks today is weighing on the overall market. Apple is down more than -3% after Barclays downgraded it to underweight due to concern about iPhone demand. Also, chip stocks are under pressure today 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. In addition, higher bond yields are weighing on stocks as the 10-year T-note yield rose to a 2-week high.
An escalation of tensions in the Middle East is weighing on 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) is up more than +3% at 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 today are higher. The 10-year T-note yield climbed to a 2-week high of 3.971% and is up +5.4 bp at 3.933%. The 10-year German bund yield rose to a 2-week high of 2.112% and is up +3.3 bp at 2.057%. The 10-year UK gilt yield rose to a 2-week high of 3.692% and is up +9.6 bp at 3.633%.
Overseas stock markets are lower. The Euro Stoxx 50 is down -0.19%. 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 are under pressure today from higher bond yields and 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. As a result, Advanced Micro Devices (AMD) is down more than -4% to lead losers in the Nasdaq 100, and Intel (INTC) is down more than -4% to lead losers in the Dow Jones Industrials. Also, ASML Holding NV (ASML) is down more than -4%, and Nvidia (NVDA), Applied Materials (AMAT), and Lam Research (LRCX) are down more than -3%. In addition, Marvel Technology (MRVL), Micron Technology (MU), NXP Semiconductors NV (NXPI), and KLA Corp (KLAC) are down more than -2%.
Apple (AAPL) is down more than -3% after Barclays downgraded the stock to underweight from equal weight with a price target of $160.
Software stocks are falling today and weighing on the overall market. Cadence Design Systems (CDNS), Intuit (INTU), Tyler Technologies (TYL), and Autodesk (ADSK) are down more than -3%. Also, Microsoft (MSFT), Ansys Inc (ANSS), Adobe (ADBE), and Oracle (ORCL) are down more than -2%.
Cruise line operators are under pressure today, with Norwegian Cruise Line Holdings (NCLH) down more than -6% to lead losers in the S&P 500. Also, Carnival (CCL) and Royal Caribbean Cruises Ltd (RCL) are down more than -4%.
Corcept Therapeutics (CORT) is down more than -26% 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) is down more than -3% after Piper Sander downgraded the stock to underweight from neutral.
Estee Lauder (EL) is down more than -1% after Deutsche Bank downgraded the stock to hold from buy.
Hasbro (HAS) is down more than -1% after D.A. Davidson downgraded the stock to neutral from buy.
Ball Corp (BALL) is down more than -1% after Bank of America Global Research downgraded the stock to underperform from neutral.
Moderna (MRNA) is up more than +11% 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 are climbing today after Macau’s Dec casino revenue surged +433.3% y/y, above the consensus of +402%. As a result, Las Vegas Sands (LVS) and Wynn Resorts (WYNN) are up more than +4%. Also, MGM Resorts International (MGM) is up more than +1%.
Defensive pharmaceutical stocks are moving higher today as the broader stock market declines. Amgen (AMGN) is up more than +4% to lead gainers in the Dow Jones Industrials. Also, Pfizer (PFE) and Bristol Myers Squibb (BMY) are up more than +4%. In addition, Viatris (VTRS), Merck & Co (MRK) and Regeneron Pharmaceuticals (REGN) are up more than +3%
Centene (CNC) is up more than +3% after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $90.
Tapestry (TPR) is up more than +3% after JPMorgan Chase raised its price target on the stock to $46 from $41.
Across the markets…
March 10-year T-notes (ZNH24) this morning are down -19 ticks, and the 10-year T-note yield is up +5.4 bp at 3.933%. Mar T-note prices today tumbled to a 2-week low, and the 10-year T-note yield rose to a 2-week high of 3.971%. T-notes are falling 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 expected to issue debt securities today.
The dollar index (DXY00) today is up by +0.74% and climbed to a 1-week high. Higher T-note yields today strengthened the dollar’s interest rate differentials and supported the dollar. Also, a slump in stocks today has boosted the liquidity demand for the dollar. In addition, an escalation of geopolitical risks in the Middle East has boosted safe-haven demand for the dollar 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.
The markets are discounting the chances for a -25 bp rate cut at 11% at the next FOMC meeting on Jan 30-31 and 89% for the following meeting on March 19-20.
EUR/USD (^EURUSD) is down by -0.81% and posted a 1-week low. Strength in the dollar today is weighing on the euro. The euro today is under pressure from a stronger dollar. Also, economic concerns weigh on EUR/USD after today’s news that the Eurozone Dec S&P manufacturing PMI contracted for the eighteenth consecutive month.
The Eurozone Dec S&P manufacturing PMI was revised upward by +0.2 to 44.4 from the previously reported 44.2, but that was the eighteenth consecutive month that manufacturing activity contracted.
Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 7% for its next meeting on Jan 25 and 60% for the following meeting on March 7.
USD/JPY (^USDJPY) is up by +0.62%. The yen today is under pressure from higher T-note yields. Today's trading activity in the yen was dampened with markets closed in Japan through Wednesday for the New Year’s holiday.
February gold (GCG4) today is up +5.7 (+0.28%), and Mar silver (SIH24) is up +0.094 (+0.39%). Gold and silver prices this morning are moderately higher. Today’s sell-off in stocks is boosting the safe-haven demand for precious metals. Also, the escalation of geopolitical risks in the Middle East has sparked safe-haven demand for precious metals after Iran dispatched a warship to the Red Sea following the U.S. Navy’s sinking of three Houthi boats. Today's rally in the dollar index to a 1-week high is limiting gains in precious metals. Also, higher global bond yields are bearish for precious metals.
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.
