Wall Street Retreats: Stocks Slip on Mixed Economic Signals

The S&P 500 Index ($SPX) (SPY) closed down -0.38% on Wednesday, with the Dow Jones Industrials Index ($DOWI) (DIA) falling -0.31%, and the Nasdaq 100 Index ($IUXX) (QQQ) dropping -0.85%.

Market Pullback Driven by Weak Earnings Reports

On Wednesday, major stocks declined as the Dow Jones Industrials retreated from a new all-time high. Numerous companies reported disappointing earnings, dragging down market performance. Notably, Dell Technologies saw its shares fall over -12% after announcing Q3 total net revenue of $24.37 billion, which was below the consensus of $24.59 billion. Similarly, HP Inc. dropped more than -11% after projecting a Q1 adjusted EPS of 70 cents-76 cents, which fell short of analyst expectations of 86 cents. In a more severe blow, Symbotic’s stock plummeted more than -38% when it revealed it could not timely file its annual Form 10-K due to a revenue recognition error. Additionally, weaknesses in semiconductor stocks pressured the technology sector and the overall market.

Mixed Economic News Provides Some Support

Despite these declines, mixed economic indicators provided some support to the market. The yield on the 10-year Treasury note fell to a three-and-a-half-week low, influenced partly by decreased T-note yields. Unexpectedly, nondefense capital goods orders, a gauge of capital investment, fell -0.2% in October, while Q3 GDP growth was revised slightly downward. Jobless claims showed mixed results: initial claims decreased to a seven-month low of 213,000, but continuing claims rose to a three-year high of 1.907 million, indicating some weaknesses in the labor market.

For the week ending November 22, MBA mortgage applications increased by +6.3%, with purchase applications rising +12.4% while refinancing applications decreased by -2.6%. The average rate for a 30-year fixed mortgage slightly dropped to 6.86% from 6.90%.

US Q3 GDP remained unchanged at 2.8% (quarter-over-quarter annualized), meeting forecasts, although personal consumption growth was adjusted down from 3.7% to 3.5%.

Widespread Financial Implications

The MNI Chicago PMI index dropped unexpectedly by -1.4 to 40.2 in November, suggesting a contraction in manufacturing activity. Meanwhile, personal spending for October increased by +0.4%, and personal income saw a stronger +0.6% rise, beating expectations.

Additionally, the core PCE price index, which the Federal Reserve favors as an inflation measure, rose +0.3% month-over-month and +2.8% year-over-year, aligning with estimates. Pending home sales also defied expectations, rising +2.0% month-over-month instead of declining as forecasted.

Global Market Trends

International markets exhibited mixed performances. The Euro Stoxx 50 closed down -0.61%, while China’s Shanghai Composite Index recovered from earlier declines, finishing up +1.53%. Japan’s Nikkei Stock 225 ended the day down -0.80%.

Interest Rates Overview

In interest rate movements, December 10-year T-notes (ZNZ24) rose by +13 ticks on Wednesday, lowering the 10-year T-note yield by -5.0 bp to 4.246%. This was supported by the overall strength in European government bonds and a revision to the US Q3 core PCE price index.

European bond yields fell, with Germany’s 10-year bund yield declining to a one-and-three-quarter month low of 2.135%. In the UK, the 10-year gilt yield dropped to a four-week low of 4.287%.

Consumer confidence indicators also showed signs of weakness, with the German GfK index declining to -23.3, below expectations.

As for the European Central Bank, swaps indicate a strong likelihood (100%) of a -25 bp rate cut at the upcoming December 12 policy meeting.

US Stock Movements

Dell Technologies (DELL) led the S&P 500 losers, closing down more than -12%. HP Inc (HPQ) saw a decrease of over -13%. Autodesk (ADSK) fell more than -8% after reporting a Q3 operating margin below analysts’ expectations.

The technology sector was particularly hard hit, with significant declines noted among firms like Micron Technology (MU), Broadcom (AVGO), and Marvell Technology (MRVL), all dropping over -3%. Nvidia (NVDA) and Advanced Micro Devices (AMD) also experienced minor declines of over -1%.

In notable exceptions, Ulta Beauty (ULTA) saw a positive gain of over +4% after a favorable report indicated weakening competitive pressures. Urban Outfitters (URBN) surged +17% after reporting Q3 sales above estimates.

Upcoming Earnings Reports

Investors will be watching for upcoming earnings reports from Cleanspark Inc (CLSK), iLearningEngines Holdings Inc (AILE), Ingles Markets Inc (IMKTA), Nordic American Tankers Ltd (NAT), Patterson Cos Inc (PDCO), Renovaro Inc (RENB), and Zuora Inc (ZUO) on November 29, 2024.

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 are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.