October 24, 2024

In discouraging market behavior, the Dow and S&P fell for their first three-day losing streaks since early September. They were coming off two losses since setting all-time highs on Friday, and the pullback follows a superb run where the indices had rallied to six straight winning weeks, the longest such streak of the year.

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The Dow Jones Industrial Average dropped 409 points to 42,514 hurt by selling for a large change in AAPL, plus AMGN, MCD on its own negative story, 3M on earnings and UNH.

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The S&P ended 54 points off to 5797 on big technology meltdowns plus the financials, while the Nasdaq really got clobbered by 296 to 18,276 with every large tech stocks getting sold off sharply, and this included NFLX which seems to have run out of gas after reaching a new all-time high last Friday on earnings and META which is hopefully just resting ahead of its report next week.

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The Russell 2000 Index of small stocks had nothing going for it with a 17 point decline to 2214 while the VIX rose to 19.24 despite tons of wasteful buying of high-priced Middle Eastern calls which never seem to be reached.

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Momentum has reversed for stocks this week as pressure has increased from rising Treasury yields. Higher yields can make investors less willing to pay high prices for stocks, which critics say already look too expensive after they rose faster than corporate profits.

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Dow component MCD helped pull the market lower and dropped 5% after federal health officials linked its Quarter Pounder burgers with an E. coli outbreak that has affected at least 49 people in 10 states. Investigators are still trying to find what specific ingredient is contaminated, and the Centers for Disease Control and Prevention said the company stopped using fresh slivered onions and quarter pound beef patties in several states while the investigation is ongoing. E. coli food poisoning linked to their Quarter Pounder hamburgers has sickened at least 49 people in 10 states, including one person who died and 10 who were hospitalized, federal health officials said.

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Another weak Dow member was KO which fell by 2% even though it reported stronger profit and revenue for the latest quarter than analysts expected. The company benefited from higher prices for its products, but a lot of focus was on how much product the company shipped during the quarter, and that fell short of some estimates.

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BA dropped again, how dare they, in what could be one of the most consequential days in years for the troubled aerospace manufacturer. The company reported a loss of more than $6 billion for the latest quarter, as it waited to see the results of a vote by machinists later in the day that could end a production-crippling strike. The stock has lost nearly 40% this year.

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The market’s most impactful losses came from Big Tech stocks. They have been battling criticism for a while that their prices soared too high amid the frenzy around artificial-intelligence technology, as NVDA and AAPL declines were the two heaviest weights on the S&P.

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Helping to limit the losses for indexes was T, which rose 4.6% after reporting stronger profit for the latest quarter than analysts expected.

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TXN also did well after the semiconductor company reported stronger profit and revenue than analysts expected. While revenue from industrial users declined from the prior quarter, all other end markets grew.

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NTRS rallied 7% after likewise topping analysts’ estimates for profit and revenue in the latest quarter.

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In the bond market, the yield on the 10-year Treasury rose again to 4.23% from 4.21% late Tuesday and from just 4.08% Friday.

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Treasury yields have been climbing after a raft of reports have shown the economy remains stronger than expected. This bolsters hopes that the economy can avoid the worst inflation in generations without the recession that many had worried was inevitable.

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Traders are now largely expecting the Fed to cut its main interest rate by half a percentage point more through the end of the year, according to data from CME Group. A month ago, some of those same traders were betting on the federal funds rate ending the year as much as half a percentage point lower than that.

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Chinese markets rose for a second day after the central bank cut its one-year and five-year Loan Prime Rates on Monday. Indexes rose 1.3% in Hong Kong and 0.5% in Shanghai, while European markets were modestly lower.

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The third-quarter earnings season continues to roll along this week with the following: yesterday: CME, GD, T, TXN, NTRS higher and Dow components BA and KO lower in addition to HLT, ENPH, WGO; today TSLA, TMUS, LRCX, MAT, AA, DOW, UPS higher and NOW, LVS, HOG, LUV, UNP and Dow component IBM lower; Friday – AN.

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So it appears that the Dow is going to start out lower because higher-priced IBM is going to start out down, in addition to BA while the Nasdaq will start out higher due to low-priced TSLA doing better after having been sold off sharply in recent weeks.

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Economic reports will see: yesterday - September existing home sales fell by 1% to the lowest level since October 2021, Fed Beige Book showed that only 2 districts saw modest growth and manufacturing declined in most districts; today – September new home sales, weekly jobless claims came in lower at 227K; Friday – September durable goods orders, final October U. of Michigan Consumer Sentiment Survey.