In recent developments, the broad market experienced a downturn as a result of growing global economic concerns and an increase in bond yields. Here’s what you need to know:
Market Performance: On Tuesday, the S&P 500 Index ($SPX) (SPY) closed down by -0.42%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down by -0.56%, and the Nasdaq 100 Index ($IUXX) (QQQ) saw a modest gain of +0.11%.
Mixed Stock Performance: Tuesday’s trading session ended with mixed results for stocks. The broader market faced losses due to disappointing economic news from China and the Eurozone, which sparked a risk-averse sentiment among investors. China witnessed its service sector’s slowest growth this year in August, while the Eurozone’s August S&P composite PMI was revised downward to its weakest level in 2-3/4 years. Additionally, rising global bond yields exerted downward pressure on stocks.
Nasdaq 100’s Upside: In contrast, the Nasdaq 100 Stock Index closed slightly higher on Tuesday, driven by a +7% surge in Airbnb and a +4% gain in Tesla. Airbnb’s boost came from its impending inclusion in the S&P 500 Stock Index later in the month, while Tesla rallied due to a more than +30% month-on-month increase in its China vehicle deliveries for August.
Economic Indicators: U.S. economic data for July revealed a -2.1% month-on-month drop in factory orders, marking the largest decline in eight months but still stronger than the expected -2.5% decline. Federal Reserve Governor Waller expressed support for a pause in Fed rate hikes, emphasizing a data-dependent approach.
Market Expectations: Currently, the market is pricing in a 7% probability of a +25 basis point rate hike at the September 20 Federal Open Market Committee (FOMC) meeting and a 48% likelihood of such a hike at the November 1 FOMC meeting.
Global Bond Yields: Global bond yields rose on Tuesday, with the 10-year T-note yield reaching a one-week high of 4.270%. The 10-year German bund yield and the 10-year UK gilt yield also reached 1-1/2 week highs, finishing at 2.613% and 4.531%, respectively.
Global Market Performance: International stock markets experienced mixed results, with the Euro Stoxx 50 down -0.25%, China’s Shanghai Composite Index down -0.71%, and Japan’s Nikkei Stock Index up +0.30%.
Weaker Economic Data: The China August Caixin services PMI fell to an 8-month low of 51.8, below expectations of 53.5. In the Eurozone, the August S&P composite PMI was revised downward to 46.7, its weakest level in 2-3/4 years.
Stock Movers: In individual stock movements, Illumina (ILMN) closed down over -5%, disappointing analysts with the announcement of Jacob Thaysen as CEO effective September 25. VF Corp (VFC) faced a -4% decline after U.S. consumer transaction data reported a -32% year-on-year drop in sales for apparel, footwear, and accessory design companies in the week ending August 27.
Pressure on Homebuilders: Homebuilders like PulteGroup (PHM), Toll Brothers (TOL), Lennar (LEN), and DR Horton (DHI) closed down more than -4% as the 10-year T-note yield reached a one-week high, causing mortgage rates to rise and dampening housing demand.
Leaders and Laggards: Tesla (TSLA) was a standout gainer, closing up more than +4% following a report of a +30.9% month-on-month increase in its China vehicle shipments for August. Airbnb (ABNB) also performed well, closing up over +7% after its inclusion in the S&P 500 Stock Index was confirmed for September 18.
Energy Stocks Rise: Energy stocks and energy service providers, including Occidental Petroleum (OXY), Haliburton (HAL), Chevron (CVX), and Devon Energy (DVN), closed up as the price of WTI crude reached a 9-1/2 month high.
CF Industries Soar: CF Industries (CF) surged more than +4% as Tampa CFR ammonia prices jumped over 32% to $390 per metric ton in the week ending September 1.
Blackstone and Oracle Gain: Blackstone (BX) closed up more than +3% after being announced as an addition to the S&P 500 Stock Index, effective September 18. Oracle (ORCL) also gained more than +2% following an upgrade from Barclays to overweight, with a price target of $150.
NetApp’s Positive Outlook: NetApp (NTAP) closed up more than +2% after Susquehanna Financial upgraded the stock to a positive rating from neutral.
Treasuries Under Pressure: December 10-year T-notes (ZNZ23) closed down by -20 ticks on Tuesday, with the 10-year T-note yield rising by +8.7 basis points to 4.266%. Negative sentiment in European government bonds, increased corporate debt issuance, and rising crude oil prices contributed to the decline in T-notes. However, they did see some safe-haven demand due to the decline in stocks and positive comments from Fed Governor Waller regarding a potential pause in rate hikes.
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Author Faith Yakubu 
