Stocks Retreat as Tech Stocks Fall on Weakness in Oracle and Apple

What you need to know…

The S&P 500 Index ($SPX) (SPY) Tuesday closed down -0.57%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.05%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.11%.

Stocks on Tuesday posted moderate losses.  Weakness in technology stocks weighed on the overall market, with Oracle closing more than -13% after reporting weaker-than-expected Q1 revenue due to slowing cloud sales.  Morgan Stanley said Oracle’s results raise questions about the timing of generative artificial intelligence (AI) demand turning into revenue across the broader business.  Also, Apple closed down more than -1% after unveiling its iPhone 15 product line.

On the positive side was a rally in energy stocks after the price of WTI crude oil climbed to a nearly 10-month high.  Also, several regional bank stocks rallied after providing optimistic outlooks at the Barclays Global Financial Services Conference.

U.S. financial markets are awaiting Wednesday’s consumer price data for direction.  The U.S. Aug CPI is expected to increase to +3.6% y/y from July’s +3.2% and June’s 2-1/4 year low of +3.0%.  However, the Aug core CPI is expected to ease to a new 1-3/4 year low of +4.3% y/y from July’s 1-3/4 year low of +4.7%.

The markets are discounting the odds at 7% for a +25 bp rate hike at the September 20 FOMC meeting and 42% for that +25 bp rate hike at the November 1 FOMC meeting. 

Global bond yields on Tuesday were mixed.  The 10-year T-note yield fell -2.6 bp to 4.262%.  The 10-year German bund yield rose +0.5 bp at 2.643%.  The 10-year UK gilt yield fell to a 1-week low of 4.407% and finished down -5.6 bp at 4.416%. 

Overseas stock markets Tuesday settled mixed.  The Euro Stoxx 50 closed down -0.28%.  China’s Shanghai Composite Index closed -0.18%. Japan’s Nikkei Stock Index closed +0.95%.

The German Sep ZEW survey expectations of economic growth unexpectedly rose +0.9 to -11.4, stronger than expectations of a decline to -15.0.

Today’s stock movers…

Oracle (ORCL) closed down more than -13% to lead losers in the S&P 500 after reporting Q1 adjusted revenue of $12.45 billion, weaker than the consensus of $12.47 billion. 

Northern Trust (NTRS) closed down more than -6% after a disappointing presentation at the Barclays Global Financial Services Conference. 

Eaton Corp Plc (ETN) closed down more than -4% on comments from CEO Arnold at a Mogan Stanley conference when he discussed tough labor conditions, extended order completion time, and tough year-over-year comparisons. 

Apple (AAPL) closed down more than -1% after it launched its new iPhone 15 product line. 

Acelyrin (SLRN) closed down more than -55% after its drug izokibep did not meet the primary endpoint of a clinical trial of patients with hidradenitis suppurativa, a chronic inflammatory skin condition. 

Comerica (CMA) closed down more than -2% after CEO Farmer said Q3 expenses could come in above prior guidance, and the company hasn’t added any brokered deposits this quarter. 

United Parcel Service (UPS) closed down more than -2% after CEO Tome said the company would pay out the biggest portion of its new five-year labor pact over the next 12 months, making for a challenging upcoming year. 

RTX Corp (RTX) closed down more than -1% after RBC Capital Markets downgraded the stock to sector perform from outperform.

Zions Bancorp (ZION) closed up more than +6% to lead gainers in the S&P 500 after the company gave an update on trends so far this quarter on deposits, net interest margin, and net interest income that were all better than estimates at the Barclays Global Financial Services Conference. 

PNC Financial Services Group (PNC) closed up more than +5% after Piper Sandler said that guidance from CEO Demchak at the Barclays Global Financial Services Conference could put upward pressure on the company’s EPS estimates. 

KeyCorp (KEY) closed up more than +5% after Piper Sandler said it was positive that management reiterated guidance at the Barclays Global Financial Services Conference.   

Energy stocks rallied Tuesday as the price of WTI crude rose more than +1% to a nearly 10-month high.  As a result, Occidental Petroleum (OXY) closed up more than +4%.  Also, APA Corp (APA) and Marathon Oil (MRO) closed up more than +3%.  In addition, Exxon Mobil (XOM), ConocoPhillips (COP), Diamondback Energy (FANG), Haliburton (HAL), Hess Corp (HES), and Schlumberger (SLB) closed up more than +2%. 

Cintas (CTAS) closed up more than +2% to lead gainers in the Nasdaq 100 after Bank of America Global Research upgraded the stock to buy from neutral with a price target of $580. 

U.S. automakers rose Tuesday after Deputy Treasury Secretary Adeyemo said the Biden administration has deployed top officials to facilitate talks between the UAW and automakers and expects a deal between the parties.  As a result, General Motors (GM) closed up more than +2%, and Ford Motor (F) and Stellantis NV (STLA) closed up more than +1%. 

Westrock (WRK) closed up more than +2% after Smurfit Kappa Group Plc agreed to acquire the company in a $11.2 billion deal. 

PayPal Holdings (PYPL) closed up more than +1% after it extended its relationship with Uber to include expanded use of payment processing and alternative debt network routing.

Across the markets…

December 10-year T-notes (ZNZ23) on Tuesday closed up +3 ticks, and the 10-year T-note yield fell -2.6 bp to 4.262%.  Dec T-notes on Tuesday posted modest gains on positive carryover from a rally in 10-year UK gilts to a 1-week high.  Also, weakness in stocks Tuesday boosted some safe-haven demand for T-notes.  Strong demand for the Treasury’s $35 billion auction of re-opened 10-year T-notes supported T-note prices as the auction had a bid-to-cover ratio of 2.52, above the 10-auction average of 2.43. 

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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.