Market Snapshot
| Dow | 32776.29 | -58.13 | (-0.18%) | | Nasdaq | 12493.88 | -150.53 | (-1.19%) | | SP 500 | 4122.54 | -17.59 | (-0.42%) | | 10-yr Note |
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| | NYSE | Adv 1092 | Dec 2031 | Vol 821 mln | | Nasdaq | Adv 1348 | Dec 3138 | Vol 5.2 bln |
Industry Watch
| Strong: Energy, Utilities, Financials, Real Estate |
| | Weak: Consumer Discretionary, Information Technology, Communication Services, Materials, Industrials |
Moving the Market
-- Waiting game ahead of Wednesday's CPI report
-- Feeling that market is due for a pullback after recent gains
-- Micron's Q4 revenue warning
-- Downside leadership from mega caps
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Closing Summary
09-Aug-22 16:30 ET
Dow -58.13 at 32776.29, Nasdaq -150.53 at 12493.88, S&P -17.59 at 4122.54
[BRIEFING.COM] Micron's (MU 59.15, -2.30, -3.7%) warning ahead of the open set the market up for a weaker showing. The stock market saw some up and down price action today, but stuck to a fairly narrow range in negative territory. It was a bit of a wait-and-see trade ahead of tomorrow's CPI release at 8:30 a.m. ET.
Micron's Q4 revenue warning, paired with disappointing guidance from stocks like Signet Jewelers (SIG 59.75, -7.92, -11.7%) and Novavax (NVAX 40.28, -16.97, -29.6%), fueled existing concerns that the market got too complacent in the midst of the sentiment-driven rebound effort off the mid-June lows and is due for a pullback.
The selling was broad-based but semiconductors, and semiconductor equipment makers, stuck out as particularly weak after Micron's warning came just one day after NVIDIA's (NVDA 170.86, -7.07, -3.9%). The PHLX Semiconductor Index (SOX) closed down 4.6% amid growing concerns that the cyclical semiconductor industry could be entering an extended slowdown phase.
Another drag on index performance was the lagging mega caps. The Vanguard Mega Cap Growth ETF (MGK) closed down 1.0% versus a 0.6% loss in the Invesco S&P 500 Equal Weight ETF (RSP) and a 0.4% loss in the S&P 500. Microsoft (MSFT 282.30, +1.98, +0.7%) and Apple (AAPL 164.92, +0.05, +0.03%) were able to go against the grain, closing with modest gains. They offered a measure of support for the information technology sector (-1.0%) but it was not enough to offset the weakness in semiconductor stocks and other components.
Besides information technology, the top laggards were consumer discretionary (-1.5%) and communication services (-0.7%) thanks to their mega cap components. The former was also held back by one of the worst performing names in the S&P 500 today, Norwegian Cruise Line (NCLH 12.10, -1.43, -10.6%) fell sharply after its disappointing quarterly results.
In the early going, oil prices were rising with WTI crude oil futures up 2.1% to $92.65 at the high. This pushed the energy sector (+1.8%) to the top spot on the day, which it maintained despite oil prices rolling over with WTI crude oil futures settling 0.3% lower at $90.37/bbl. The gains in Occidental Petroleum (OXY 62.41, +2.37, +3.9%), thanks to Berkshire Hathaway buying more shares, boosted sector performance along with leadership from Exxon (XOM 90.59, +1.64, +1.8%) and Chevron (CVX 155.41, +2.00, +1.3%).
Separately, the 2-yr note yield rose six basis points to 3.26% while the 10-yr note yield rose three basis points to 2.80%.
Market participants will receive the July CPI (Briefing.com consensus 0.2%; prior 1.3%) and core CPI (Briefing.com consensus 0.5%; prior 0.7%) at 8:30 a.m. ET. Other economic data includes the weekly MBA Mortgage Applications Index (prior 1.2%) at 7:00 a.m. ET, June Wholesale Inventories (Briefing.com consensus 1.9%; prior 1.8%) at 10:00 a.m. ET, weekly EIA Crude Oil Inventories (prior +4.47M) at 10:30 a.m. ET, and the July Treasury Budget (prior -$88.8B) at 2:00 p.m. ET.
Earnings reports ahead of tomorrow's open will be headlined by Ballard Power (BLDP), CyberArk (CYBR), Fox Corporation (FOXA), Jack In The Box (JACK), Wendy's (WEN), and Wolverine (WWW).
Reviewing today's economic data:
- Q2 Productivity-Prel -4.6% (Briefing.com consensus -4.5%); Prior was revised to -7.4% from -7.3%; Q2 Unit Labor Costs - Prel 10.8% (Briefing.com consensus 9.3%); Prior was revised to 12.7% from 12.6%
- The key takeaway from the report is that the 2.5% decrease in nonfarm business sector labor productivity from the same quarter a year ago was the largest decline in labor productivity from the same quarter a year ago since that data series began in the first quarter of 1948.
- July NFIB Small Business Optimism 89.9; Prior 89.5
Dow Jones Industrial Average: -9.8% YTD
S&P 400: -12.1% YTD
S&P 500: -13.5% YTD
Russell 2000: -14.8% YTD
Nasdaq Composite: -20.1% YTD
Market climbing into the close
09-Aug-22 15:30 ET
Dow -44.16 at 32790.26, Nasdaq -138.05 at 12506.36, S&P -14.40 at 4125.73
[BRIEFING.COM] The market is steadily increasing heading into the close.
After the close, Akamai Tech (AKAM), Alarm.com (ALRM), Coinbase Global (COIN), InterActiveCorp (IAC), Plug Power (PLUG), Roblox (RBLX), Sweetgreen (SG), The Trade Desk (TTD), Unity Software (U), Workiva (WK), and Wynn Resorts (WYNN) are all set to report earnings.
Earnings reports ahead of tomorrow's open will be headlined by Ballard Power (BLDP), CyberArk (CYBR), Fox Corporation (FOXA), Jack In The Box (JACK), Wendy's (WEN), and Wolverine (WWW).
Market participants will receive the July CPI (Briefing.com consensus 0.2%; prior 1.3%) and core CPI (Briefing.com consensus 0.5%; prior 0.7%) at 8:30 a.m. ET. Other economic data includes the weekly MBA Mortgage Applications Index (prior 1.2%) at 7:00 a.m. ET, June Wholesale Inventories (Briefing.com consensus 1.9%; prior 1.8%) at 10:00 a.m. ET, weekly EIA Crude Oil Inventories (prior +4.47M) at 10:30 a.m. ET, and the July Treasury Budget (prior -$88.8B) at 2:00 p.m. ET.
Market moves mostly sideways
09-Aug-22 15:05 ET
Dow -76.84 at 32757.58, Nasdaq -157.41 at 12487.00, S&P -21.00 at 4119.13
[BRIEFING.COM] The market has seen some up and down action recently, albeit in a narrow range.
The S&P 500 energy sector (+1.5%) is firmly in first place today. Also, WTI crude oil futures settled 0.3% lower at $90.37/bbl. Natural gas futures rose 3.5% to $7.83/mmbtu. Unleaded gasoline futures rose 2.6% to $2.96/gal.
Separately, the 2-yr note yield is up six basis points to 3.26% while the 10-yr note yield is up four basis points to 2.80%.
Warner Bros. Discovery extends earnings-related weakness, BBWI underperforms ahead of results in S&P
09-Aug-22 14:30 ET
Dow -118.16 at 32716.26, Nasdaq -183.14 at 12461.27, S&P -27.08 at 4113.05
[BRIEFING.COM] The S&P 500 (-0.65%) is firmly entrenched in second place on Tuesday afternoon; the index is down now about 11.3% off the late-March highs.
S&P 500 constituents Moderna (MRNA 170.15, -12.79, -6.99%), Warner Bros. Discovery (WBD 13.02, -1.00, -7.13%), and Bath & Body Works (BBWI 35.96, -2.36, -6.16%) pepper the bottom of the standings. WBD continues recent earnings-related weakness, while BBWI is slated to release earnings a week from tomorrow.
Meanwhile, Nielsen (NLSN 27.52, +4.81, +21.18%) is today's top performer after the company moved to postpone its special meeting of shareholders to allow time for a preliminary agreement to give effect to the WindAcre deal.
Gold ends higher on Tuesday
09-Aug-22 14:00 ET
Dow -44.51 at 32789.91, Nasdaq -158.70 at 12485.71, S&P -17.29 at 4122.84
[BRIEFING.COM] With about two hours remaining on Tuesday the tech-heavy Nasdaq Composite (-1.26%) remains today's worst-performing index.
Gold futures settled $7.10 higher (+0.4%) to $1,812.30/oz, aided by a moderately lower greenback, but held back by mixed treasury yields.
Meanwhile, the U.S. Dollar Index is down about -0.1% to $106.32.
Micron's gloomy outlook adds more angst for chip space as slowing demand spreads beyond PCs (MU)
Updated: 09-Aug-22 11:15 ET
Micron (MU) became the latest chip company to warn that slowing demand, macroeconomic headwinds, and supply chain constraints are pressuring the semiconductor industry more than originally anticipated. One day after NVIDIA (NVDA) sharply cut its Q2 revenue guidance due to weakness in its Gaming segment, MU disclosed that Q4 revenue may come in at or below the low end of its prior guidance range of $6.8-$7.6 bln. Furthermore, MU now expects free cash flow to be negative in 1Q23, compared to $671 mln in free cash flow for 1Q22, prompting it to significantly reduce wafer fab equipment capex expectations for FY23.
It's not news that a meaningful slowdown is occurring in the semiconductor space. That's been well-established through the disappointing earnings reports and/or outlooks from Intel (INTC), Advanced Micro Devices (AMD), and NVDA. However, what is catching investors off-guard is the severity and speed of the downturn as the deterioration spreads across markets.
- When MU reported Q3 results in late June, the weakness that caused it to issue downside Q4 EPS and revenue guidance was mainly relegated to the PC and smartphone markets. At the time, the company forecasted PC and smartphone sales to fall by 10% and 15%, respectively, this year.
- Now, it's evident that the formerly red-hot data center market is also cooling off as enterprises delay some of their cloud investments. During AMD's earnings conference call last week, executives stated that some deals in the data center market are taking longer to close and that trends in the enterprise business are more mixed.
- Although INTC's troubles are partly tied to execution issues, softening business conditions also weighed on its Datacenter and AI Group (DCAI) in Q2, which posted a 16% decline in revenue.
- This deceleration is very problematic for MU because the data center market has been offsetting weakness in PCs and smartphones. Last quarter, data center revenue surged by 50% yr/yr, compared to a 2% decrease for the mobile business.
- The broad-based erosion in demand is clearly seen through MU's updated outlook on bit shipments. Specifically, bit shipments are expected to decline sequentially in 1Q23, causing a substantial qtr/qtr decline in revenue and margins. Looking further back to strip out noise from the pandemic, we note that revenue in 1Q20 (ending 11/2019) grew by 5.6% sequentially. In the fiscal year before that, Q1 revenue did fall by 6.2% qtr/qtr, but 1Q18 revenue was up by 10.8%.
The hits keep on coming for the semiconductor industry and MU's gloomy forecast really puts the downturn into perspective. It was less than a month-and-a-half ago that the company issued Q4 guidance that was well below expectations. With MU now expecting revenue to possibly come in below that downbeat outlook, any hope that demand has already hit a bottom has been dashed. The only silver lining is that MU and others have taken a more prudent approach with production to support margins and to avoid a relatively less severe supply and demand imbalance. Over the next couple of quarters, we will see whether that strategy pays off in the form of a quicker recovery.
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