Company News for Sep 19, 2024

The S&P 500 Index Wednesday closed down by -0.29%, the Dow Jones Industrials Index closed down by -0.25%, and the Nasdaq 100 Index closed down by -0.45%.

Stocks on Wednesday gave up mid-session gains and turned lower as hawkish comments from Fed Chair Powell pushed bond yields higher and sparked the selling of chip stocks when he said the Fed was in no rush to ease monetary policy.

Stocks initially rallied Wednesday afternoon, with the S&P 500 and Dow Jones Industrials climbing to new record highs and the Nasdaq 100 climbing to a 3-week high. The FOMC’s decision Wednesday to cut the fed funds target range by -50 bp and project another -50 bp worth of rate cuts by year-end pushed stock prices higher. Also, Wednesday’s US housing starts and building permits reports were better than expected, bolstering the prospects for a soft landing and supporting stocks.

The FOMC voted 11-1 to cut the federal funds target range by -50 bp to 4.75%-5.00% and said the committee is "strongly committed to supporting maximum employment" and returning inflation to its 2% goal.

The FOMC cut its federal funds forecast for the end of 2024 to 4.375% from 5.125% in June, implying another 50 bp of rate cuts by the end of the year.

The FOMC cut its 2024 US GDP forecast to +2.0% from +2.1% in June and cut its 2024 core PCE estimate to +2.6% from +2.8% in June. The FOMC also raised its 2024 unemployment forecast to 4.4% from 4.0% in June.

Fed Chair Powell said, "We made a good, strong start" by cutting rates by 50 bp Wednesday, and the Fed is "squarely focused" on its dual mandate of inflation and employment. He added that the Fed is not in a rush to ease policy and "we will move as fast or as slow" as policymakers consider appropriate based on the data.

US MBA mortgage applications rose +14.2% in the week ended September 13, with the purchase mortgage sub-index rising +5.4% and the refinancing mortgage sub-index rising +24.2%. The average 30-year fixed rate mortgage fell -14 bp to a 2-year low of 6.15% from 6.29% in the prior week.

US Aug housing starts rose +9.6% m/m to a 4-month high of 1.356 million, stronger than expectations of 1.318 million. Aug building permits, a proxy for future construction, rose +4.9% m/m to a 5-month high of 1.475 million, stronger than expectations of 1.410 million.

The markets are discounting the chances at 100% for a -25 bp rate cut at the November 6-7 FOMC meeting and at 36% for a -50 bp rate cut at that meeting.

Overseas stock markets Wednesday settled mixed. The Euro Stoxx 50 closed down -0.52%. China's Shanghai Composite recovered from a 7-1/4 month low and closed up +0.49%. Japan's Nikkei Stock 225 closed up +0.49%.

Interest Rates

December 10-year T-notes (ZNZ24) Wednesday closed down -9.5 ticks. The 10-year T-note yield rose +4.1 bp to 3.687%. Dec T-notes Wednesday fell to a 1-week low, and the 10-year T-note yield rose to a 1-week high of 3.173%. T-notes were under pressure Wednesday on negative carryover from a slide in European government bonds to 1-week lows. T-notes also fell on Wednesday’s stronger-than-expected US Aug housing starts and building permits reports. In addition, rising inflation expectations are bearish for T-notes after the 10-year breakeven inflation rate Wednesday rose to a 2-week high of 2.166%.

T-notes erased their losses and briefly moved higher Wednesday afternoon after the FOMC cut the federal funds target range by -50 bp and projected another -50 bp of rate cuts this year. Also, the action by the FOMC to cut its US 2024 GDP forecast and its core PCE price estimate were bullish for T-notes. However, T-notes gave up their gains and fell to their lows Wednesday afternoon after Fed Chair Powell said the Fed is in no rush to ease monetary policy.

European government bond yields on Wednesday moved higher. The 10-year German bund yield climbed to a 1-week high of 2.195% and finished up +4.7 bp to 2.190%. The 10-year UK gilt yield rose to a 1-week high of 3.854% and finished up +7.9 bp to 3.847%.

ECB Governing Council member Villeroy de Galhau said, "The ECB has cut interest rates twice and should continue to cut them," as victory over inflation is "within sight."

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 32% for the October 17 meeting.

US Stock Movers

Weakness in chip stocks weighed on the overall market. Intel closed down more than -3% to lead losers in the Dow Jones Industrials and the Nasdaq 100. Also, Nvidia , Advanced Micro Devices , Marvell Technology , Micron Technology , KLA Corp , Lam Research , Analog Devices , Applied Materials , and ON Semiconductor closed down more than-1%.

ResMed closed down more than -5% to lead losers in the S&P 500 after Wolfe Research downgraded the stock to underperform from peer perform with a price target of $180.

Sysco closed down more than -4% after CEO Hourican said restaurant traffic industrywide had softened a bit in the current quarter.

Cencora closed down more than -2% after Bank of America Global Research downgraded the stock to neutral from buy.

Incyte Corp closed down more than -1% after Truist Securities downgraded the stock to hold from buy.

Hilton Grand Vacations closed down nearly -1% after Goldman Sachs initiated coverage on the stock with a sell recommendation and a price target of $31.

General Motors closed up more than +2% as its customers with electric vehicles (EVs) now have access to 17,800 Tesla Superchargers starting this month, which may boost EV sales for GM as customer concerns ease about charging infrastructure with the expanded charger access.

PayPal Holdings rose more than +1% after announcing a new partnership with Amazon Buy with Prime.

VF Corp closed up more than +3% after Barclays upgraded the stock to overweight from equal weight with a price target of $22.

Victoria’s Secret & Co closed up more than +3% after Barclays upgraded the stock to equal weight from underweight.

GE Healthcare closed up nearly +2% after BTIG upgraded the stock to buy from neutral with a price target of $100.

United States Steel closed up more than +1% after a US security panel granted Nippon Steel permission to refile its plans to purchase the company for $14.1 billion.

Extra Space Storage closed up more than +1% after Jeffries upgraded the stock to buy from hold with a price target of $204.

Earnings Reports (9/19/2024)

Darden Restaurants Inc (DRI), FactSet Research Systems Inc (FDS), FedEx Corp (FDX), Lennar Corp (LEN).

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 Policyhere.

Tech stocks were lower late Wednesday afternoon, with the Technology Select Sector SPDR Fund (XLK) down 0.8% and the SPDR S&P Semiconductor ETF (XSD) easing 0.2%.

The Philadelphia Semiconductor Index was shedding 1%.

In corporate news, Microsoft will not face any scrutiny in the EU for its acquisition of certain Inflection AI assets after seven member states withdrew their initial referral requests, the European Commission said Wednesday. Microsoft shares were decreasing 0.9%.

Intuitive Machines shares jumped 38% after the company said late Tuesday that it was awarded a communication and navigation services contract from the National Aeronautics and Space Administration. The contract, with a base period of five years and an additional five-year option period, has a maximum potential value of $4.82 billion.

Alphabet unit Google has won its appeal against a 1.49 billion euro ($1.66 billion) fine imposed by the European Commission about five years ago for alleged abusive practices in online advertising. Alphabet shares were adding 0.3%.

Qualcomm's fine over predatory pricing and abuse of its dominant position in the market has been largely upheld by the General Court, the Court of Justice of the EU said Wednesday. Qualcomm shares were shedding 0.2%.

Energy stocks were higher late Wednesday afternoon, with the NYSE Energy Sector Index up 0.6% and the Energy Select Sector SPDR Fund (XLE) rising 0.3%.

The Philadelphia Oil Service Sector index was posting a 1% drop, and the Dow Jones US Utilities index was shedding 0.8%.

US crude oil stocks, including those in the Strategic Petroleum Reserve, fell by 1 million barrels in the week ended Sept. 13 following an increase of 1.1 million barrels in the previous week. Excluding inventories in the SPR, commercial crude oil stocks fell by 1.6 million barrels after an 800,000-barrel increase in the previous week, a larger drop than the 100,000-barrel decrease expected in a survey compiled by Bloomberg.

Front-month West Texas Intermediate crude oil declined 1% to $70.45 a barrel while the global benchmark Brent crude contract shed 0.7% to $73.17 a barrel. Henry Hub natural gas futures fell 1.1% to $2.30 per 1 million BTU.

In corporate news, Casella Waste Systems shares dropped 5.4% after the company said Wednesday it priced a public offering of 4.5 million shares at $100 per share, for gross proceeds of about $450 million.

HNR Acquisition said it has changed its name and ticker to EON Resources E from Wednesday to reflect its conversion to an oil production firm from a special purpose acquisition company. Its shares tumbled 10.1%.

Golar LNG said it signed an engineering, procurement and construction contract worth $1.6 billion with CIMC Raffles for a MK II Floating LNG Production vessel. Golar shares were shedding 2.4%.

TotalEnergies said it has signed a heads of agreement with BOTAS to deliver 1.1 million tons of liquefied natural gas annually for 10 years starting 2027. TotalEnergies shares eased 0.2%.

U.S. stocks traded higher toward the end of trading, after the Federal Reserve slashed interest rates.

The Dow traded up 0.33% to 41,744.18 while the NASDAQ rose 0.71% to 17,752.73. The S&P 500 also rose, gaining, 0.43% to 5,659.04.

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Leading and Lagging Sectors

Consumer discretionary shares rose by 0.9% on Wednesday.

In trading on Wednesday, utilities shares fell by 0.7%.

Top Headline

The Federal Reserve slashed interest rates by 50 basis points Wednesday at its September Federal Open Market Committee meeting, lowering the federal funds rate to a range of 4.75% to 5%. This marks the first rate cut in over four years and breaks a streak of 12 consecutive months with rates held steady.

Equities Trading UP

• Intuitive Machines, Inc. shares shot up 48% to $8.00 after the company announced it was awarded a NASA Near Space Network contract for communication and navigation services, with a maximum potential value of $4.82 billion.
• Shares of Applied Therapeutics, Inc. got a boost, surging 61% to $7.47 after the FDA communicated that an advisory committee meeting would no longer be required.
• PowerFleet, Inc. shares were also up, gaining 10% to $5.09 after the company announced it entered into a definitive agreement for the acquisition of Fleet Complete for $200 million.

Equities Trading DOWN

• NANO Nuclear Energy Inc shares dropped 11% to $11.06 after jumping 290% on Tuesday.
• Shares of Wheeler Real Estate Investment Trust, Inc. were down 24% to $7.10. The company announced a 1-for-3 reverse stock split of common stock.
• Cibus, Inc. was down, falling 28% to $3.62 after the company announced the pricing of $12 million offering of 3 million shares at $4.00 per share.

Commodities

In commodity news, oil traded down 0.1% to $71.12 while gold traded up 1% at $2,618.80.

Silver traded down 1.2% to $31.34 on Wednesday, while copper rose 1.3% to $4.3275.

Euro zone

European shares closed lower today. The eurozone's STOXX 600 fell 0.50%, Germany's DAX fell 0.08% and France's CAC 40 fell 0.57%. Spain's IBEX 35 Index fell 0.16%, while London's FTSE 100 fell 0.68%.

Annual inflation rate in the Eurozone fell to 2.2% in August, recording the lowest level since July 2021, compared to 2.6% in the prior month. Construction output in the Eurozone fell by 2.2% year-over-year in July compared to a revised 1.3% decline in the previous month.

Annual inflation rate in the UK came in unchanged at 2.2% in August, in line with estimates, while producer prices increased 0.2% year-over-year in August.

Asia Pacific Markets

Asian markets closed mostly higher on Wednesday, with Japan's Nikkei 225 gaining 0.49%, China's Shanghai Composite Index gaining 0.49% and India's BSE Sensex falling 0.16%.

Japanese trade deficit shrank to JPY 695.30 billion in August from JPY 940.10 billion in the year-earlier month, and versus market expectations of a JPY 1,380 billion gap.

Economics

• U.S. mortgage applications surged by 14.2% from the prior week in the week ending Sept. 13.
• Housing starts in the U.S. climbed by 9.6% from the prior month to an annualized rate of 1.356 million units for August.
• U.S. building permits gained by 4.9% to an adjusted annual rate of 1.475 million in August.
• U.S. crude oil inventories declined by 1.630 million barrels in the week ended Sept. 13, compared to market estimates of a 0.1 million decrease.

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