Market Overview
The stock market started the new month sharply lower. Major indices tumbled out of the gate before briefly plateauing around mid-day. Selling picked up again in the afternoon trade, leading the Dow Jones Industrial Average to settle more than 600 points lower. The Nasdaq Composite closed nearly 600 points lower, the S&P 500 declined more than 100 points, and the Russell 2000 shed 3.1%.
Volume and Economic Concerns
Volume increased today after running below average in recent weeks. The downside bias was related to normal consolidation activity, sparked by growth worries after China's Manufacturing PMI for August showed a deepening contraction. This morning's release of the ISM Manufacturing Index for August showed improvement, but not as much as expected, piling onto the emerging concerns.Treasury Yields and Volatility
Treasury yields settled lower in response to the growth concerns and soft economic data. The 10-yr note yield fell seven basis points to 3.84% and the 2-yr note yield settled four basis points lower at 3.89%. Also, the CBOE Volatility Index was up 37%, or 5.55, to 20.55 with participants hedging for the possibility of further downside.Sector Performance
Just about everything came along for the downside ride. The equal-weighted S&P 500 settled 1.3% lower and nine of the 11 S&P 500 sectors registered losses.- The information technology sector (-4.4%) logged the biggest loss due to weakness in its mega cap and semiconductor components. The PHLX Semiconductor (SOX) sank 7.8%. NVIDIA (NVDA, Financial) was an influential loser in the space, falling under profit-taking interest.
- The energy sector (-2.4%) was another laggard, dropping alongside oil prices in another manifestation of growth worries. WTI crude oil futures fell 4.3% to $70.37/bbl.
Year-to-Date Performance
- S&P 500: +15.9% YTD
- Nasdaq Composite: +14.2% YTD
- Dow Jones Industrial Average: +8.6% YTD
- S&P Midcap 400: +8.3% YTD
- Russell 2000: +6.0% YTD
Economic Data Review
- August S&P Global US Manufacturing PMI - Final 47.9; Prior 48.0
- August ISM Manufacturing Index 47.2% (consensus 47.5%); Prior 46.8%
- The key takeaway from the report is that it has reinforced the understanding that conditions in the U.S. manufacturing sector are weak.
- July Construction Spending -0.3% (consensus 0.2%); Prior was revised to 0.0% from -0.3%
- The key takeaway from the report is that new single-family construction was weak in July.
Wednesday's Economic Lineup
- 7:00 ET: Weekly MBA Mortgage Index (prior 0.5%)
- 8:30 ET: July Trade Balance (consensus -$78.5 bln; prior -$73.1 bln)
- 10:00 ET: July Factory Orders (consensus 4.5%; prior -3.3%) and July job openings (prior 8.184 mln)
Overseas Markets
- Europe: DAX -0.9%, FTSE -0.8%, CAC -0.9%
- Asia: Nikkei +0.1%, Hang Seng -0.2%, Shanghai -0.3%
Commodities
- Crude Oil -3.15 @ 70.37
- Nat Gas +0.09 @ 2.21
- Gold -6.00 @ 2522.20
- Silver -0.76 @ 28.39
- Copper -0.13 @ 4.09
NVDA
Guru Stock Picks
Chou RRSP Fund has made the following transactions:
- Sold out in TSX:BHC
- Add in TSXV:RET.A by 2394.77%
- New position in TSX:TCW
Matthews China Fund has made the following transactions:
- Reduce in PDD by 0.83%
- Sold out in HKSE:06098
- Add in SHSE:603501 by 33.53%
- New position in SHSE:603699
Matthews Japan Fund has made the following transactions:
Matthews Pacific Tiger Fund has made the following transactions:
- Reduce in BOM:500114 by 61%
- Sold out in HKSE:03908
- Add in ROCO:8069 by 2.15%
- New position in XKLS:4863
Matthews Emerging Markets Small Companies Fund has made the following transactions:
- Reduce in HKSE:00357 by 8.48%
- Sold out in SHSE:688006
- Add in HKSE:01995 by 48.59%
- New position in JSE:OMU
Royce International Premier Fund has made the following transactions:
- Reduce in BSP:TOTS3 by 25.97%
- Sold out in XTER:NOEJ
- Add in OSTO:VIT B by 83.04%
- New position in OSTO:SDIP B
Today's News
Zscaler (ZS, Financial) shares fell 6% in extended trading after the cybersecurity firm reported fiscal Q4 results that beat expectations, but its fiscal 2025 outlook fell short. Zscaler expects to earn between $2.81 and $2.87 per share on an adjusted basis, below the $3.36 per share estimate. Sales are forecasted between $2.6B and $2.62B, also falling short of the $2.63B estimate. For the period ending July 31, Zscaler reported an adjusted $0.88 per share on $592.9M in revenue, up 30% year-over-year.
GitLab (GTLB, Financial) shares surged 9.5% in after-hours trading following its fiscal Q2 results that exceeded expectations and an upward revision of its full-year outlook. GitLab reported an adjusted $0.15 per share, with revenue rising 31% year-over-year to $182.6M. Analysts had expected an adjusted $0.10 per share on $177.15M in revenue.
Semiconductor stocks, including Nvidia (NVDA, Financial), Intel (INTC, Financial), and AMD (AMD, Financial), saw significant declines on Tuesday. Nvidia dropped 9.5%, erasing nearly $280B in market value, while AMD fell 7.8%. Intel shares also fell over 8.5%, giving up gains from last week. The sector is awaiting Broadcom's (AVGO) quarterly results later this week.
Starwood Property Trust (STWD, Financial) announced a public offering of 17.5M shares, with an option for underwriters to purchase an additional 2.6M shares. The company plans to use the proceeds to originate and purchase additional commercial mortgage loans and other investments. STWD shares fell 3.86% to $19.75 in after-hours trading.
Independence Realty Trust (IRT, Financial) shares dipped 5.0% in after-hours trading after announcing a public offering of 10M shares. The company also plans to enter a forward sale agreement with Citigroup (C) for an additional 1.5M shares if the underwriters exercise their option. Proceeds will be used for potential acquisitions and other investment opportunities.
Medical Properties Trust (MPW, Financial) tenant Steward Health Care agreed to sell its Wadley Regional Medical Center to Christus Health. The transaction, subject to bankruptcy court approval, is expected to close in the coming months. Last week, MPW and Steward reached an agreement to settle their disputes.
Despite near record-high sales in the semiconductor industry, stocks in the sector remained volatile. Global semiconductor sales totaled $53.1B in July, up nearly 3% from the previous month and almost 19% year-over-year. The Americas market saw particularly strong growth, with a 40.1% year-over-year sales increase.
Asana (ASAN, Financial) reported Q2 results with a non-GAAP EPS of -$0.05, beating estimates by $0.03. Revenue was $179.21M, up 10.3% year-over-year. For Q3, Asana expects revenues between $180M and $181M, with a non-GAAP net loss per share of $0.07.
Lumen Technologies (LUMN, Financial) dropped 6% amid a new short idea from Hedgeye, which sees potential for 40% downside. Hedgeye cited Lumen's high leverage, declining EBITDA margins, and limited free cash flow generation as key concerns.
Shares of The Coca-Cola Company (KO, Financial) rose for the seventh consecutive day, closing up 0.75% at $73.02. The stock has gained about 24% in the last 12 months and 23% year-to-date. Analysts have a Hold rating on the company, citing its yield below 3% and high forward P/E ratio.
Molson Coors (TAP, Financial) shares rose 5% amid speculation of a cancellation from a Barclays conference. The cancellation was attributed to a lack of scheduling availability, and the stock was the biggest gainer in the S&P 500 Index on Tuesday.
RTX Corporation (RTX) shares snapped a seven-day winning streak, closing 1.91% lower at $120.99. The stock has gained about 46.6% this year. RTX has to pay a $200M fine to settle allegations of violating export laws by exchanging data and products with prohibited countries, including China.
Super Micro Computer (SMCI) CEO Charles Liang reassured customers that recent events, including a delay in its annual report and a short disclosure by Hindenburg Research, would not impact the company's operations. Shares were down following the news.
CSX Corporation (CSX) is considering its options after a U.S. appeals court refused to restart its lawsuit against Norfolk Southern (NSC) over access to a key Virginia container port. The company was seeking hundreds of millions of dollars in damages.
Recursion Pharmaceuticals (RXRX) led a selloff among AI-driven biotechs after announcing initial results from a Phase 2 trial for its lead asset REC-994. While the trial met its primary endpoint of safety and tolerability, the company has yet to see improvements in patient-reported outcomes. Shares of Nvidia (NVDA, Financial), which invested in Recursion, also fell.
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