October 16, 2024

The market got a bit of a negative comeuppance yesterday as the price of crude oil tumbled and technology stocks faltered.

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The Dow was never able to get it together and got whacked for 325 points lower down to 42,470 led by selling in CAT, CVX on the weakness in oil, IBM and an awful earnings-related session from UNH, whose high price always has a large effect on this index in both directions.  

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The S&P ended lower after a nominally higher start with its 46th record high close this year earlier in the week. It ended down by a large 44 points to 5815 and it was mainly due to the very large negative effect of the semiconductors after a poor report from ASML, and this primarily hurt the shares of NVDA which started out the day at a new high of 138, in addition to AMD, NFLX and META. On the other hand, AAPL actually reached a new all-time intraday high earlier in the session before falling back a little from that best-ever level, which is why the constant attempts to downgrade this one sort of feel a little empty.  

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The Nasdaq got blasted on the negative ASML news which hurt others in this group such as KLAC, LRCX, AMAT and CVCT. On the other hand, the Russell 2000 Index of small stocks was able to eke out a nominal gain on some strength in local banks to 2250 and the VIX ended a little higher at 20.64. The call options will expire worthless at prices near 20 with many people losing their bearish attempts to get involved with strike prices as high as 160 as even during the historical meltdown of October 1987 it got to 130 and this can never take place again because the market stops trading after an intraday 12% collapse instead of the 22% one on that day.  

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XOM dropped 3%, and energy stocks fell to some of the sharpest losses after oil prices tumbled more than 4%. A barrel of Brent crude, the international standard, has fallen back below $75 from more than $80 last week.  

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Crude prices have been weakening as China’s flagging economic growth raises concerns about demand for oil. At the same time, worries have receded about Israel possibly attacking Iranian oil facilities as part of its retaliation against Iran’s missile attack early this month. Iran is a major producer of crude, and a strike could upend its exports to China and elsewhere.  

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Stocks for companies across the chip industry fell after Dutch supplier ASML reported its latest quarterly results. Its CEO said A.I. continues to offer strong upside potential, but “other market segments are taking longer to recover,” and ASML’s stock trading in the United States fell by 16%.  

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Helping to keep the S&P and Dow close to their records set on Monday were gains for several financial companies following better-than-expected profit reports for the summer.  

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SCHW jumped 6% as more customers opened brokerage accounts at the company, helping to bring its total client assets to a record $9.92 trillion. BAC added 0.5%, and its CEO said his company benefited from higher average loans and fees for investment banking and asset management.  

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WBA was another winner, up 16% after topping analysts’ forecasts. The drugstore chain also said it will close around 1,200 locations over the next three years as it tries to turn around its struggling U.S. business.  

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Chipmaker WULF jumped 21% to trim its loss for the year to 68% after the Biden-Harris administration announced plans to provide direct funding to the company. The money will support its new silicon carbide factory in North Carolina that makes the wafers used in advanced computer chips.  

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In the bond market, trading of Treasurys resumed after a holiday on Monday, and yields sank following a weaker-than-expected report on manufacturing in New York state.  

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The yield on the 10-year Treasury fell to 4.03% from 4.10% late Friday. Manufacturing has been one of the areas of the U.S. economy hurt most by high interest rates caused by the Federal Reserve in its efforts to slow the economy enough to stamp out high inflation.  

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Recent reports showing the economy remaining stronger than expected have raised optimism that the Fed can pull off a perfect landing where it gets inflation down close to 2% without causing a recession that many had thought would be necessary.  

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Because of expectations for continued growth for the U.S. economy, as well as the boost that lower rates can give to corporate profits and prices for stocks, strategists have raised their forecast for how high the S&P could go this year and next, as much as 6000 by the end of 2024.  

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In stock markets abroad, Chinese stocks fell sharply as doubts continue about whether the government will offer enough fiscal stimulus to prop up the world’s second-largest economy.  

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Stocks in Shanghai fell 2.5%, and Hong Kong’s Hang Seng index dropped 3.7%.  

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Indexes were mixed elsewhere in Asia and in Europe.  

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This week starts the main part of 3Q earnings results with the following lineup: yesterday - BAC, SCHW higher while Dow components JNJ and UNH plus ASML were lower; today JBHT, MS and UAL higher while IBKR is lower; Thursday – BLK, Truist, ISRG, NFLX and TWS and Dow component TRV on Thursday; Dow components AXP and PG plus SLB on Friday.  

Economic reports will see: yesterday - October N.Y. State Empire Manufacturing Survey fell by 11.9%; Thursday – September retail sales, weekly jobless claims, September industrial production; Friday – September housing starts.