iPhone Doesn't Call All the Shots on Wall Street
The week isn't so bad so far despite some poor numbers from Apple, now let's look ahead to today's setup, as well as Intel, Salesforce and Palantir.
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The week at hand really did not get off to a bad start at all on Monday, when one considers that equity markets had to get past reports that first weekend pre-order sales for iPhone 16 were down 12.7% year over year from first weekend pre-orders sales for iPhone 15. Sure, Apple AAPL sold off a bit, giving up 2.78% for the session, Sure, Skyworks SWKS, Cirrus CRUS, and Qorvo QRVO, all participants in the Apple supply chain, all gave back 5% or more on Monday, while other suppliers such as Broadcom AVGO and Qualcomm QCOM suffered less severe losses.
But broader markets were not hit nearly as hard. In fact, equity markets were mostly higher, which shows that Apple, while still our market's most valuable company and still one of our markets most widely held publicly traded companies, no longer has the kind of impact on overall market sentiment it once had. I see it. The two main Nasdaq indexes closed in the red on Monday as did the Technology sector SPDR exchange-traded fund XLK. The sector was led lower by the semiconductors on the day. The Philadelphia Semiconductor Index backed up 1.41% on Monday, led in a southerly direction by the above-mentioned firms, but the pressure really did not extend past those firms directly impacted.
As a matter of fact, there were even winners within the semiconductor space. Perennial loser Intel INTC was no loser on Monday. That stock gained 6.36% for the day, up early on news reported by Bloomberg that the company had qualified for as much as $3.5 billion in federal grants to manufacture semiconductors for the Department of Defense. Later, on Monday afternoon, it was confirmed that Intel would receive up to $3 billion in direct funding under that Act for the Secure Enclave program, which focuses on Department of Defense projects. These funds are to be separate from the $8.5 billion in grants and $11 billion in loans already awarded to Intel under this Act earlier this year.
Intel is up an additional 6% overnight on plans to establish its foundry business as an independent subsidiary, which of course has some speculating that this business could eventually be spun off on its own.
Marketplace: Shh, Any Crickets?
Trade, overall, was a little on the quiet side on Monday, ahead of this Wednesday's Federal Open Market Committee picnic on Wednesday afternoon. The Dow Industrials were up 0.55%, led in a northerly direction by Intel, as the Dow Transports gained 0.72%. The wealth was more evenly spread across that group. The S&P 500 added just 0.13% as the Nasdaq Composite backed up 0.52%. Among mid-major indexes, the KBW Bank Index led the way, up 1.48%, as Treasury yields worked their way lower. This also gave a boost to small and mid-cap stocks.
Breadth was positive. Nine of the 11 S&P sector SPDR ETFs, as the Financials XLF, Energy XLE, and Communication Services XLC funds all gained more than 1%. Discretionaries XLY joined Tech in the red for the session.
Winners beat losers by roughly 5 to 2 at the New York Stock Exchange and 5 to 4 at the Nasdaq. Advancing volume took a 71.3% share of composite NYSE-listed trade on Monday and a 53.9% share of composite Nasdaq-listed activity as well. Think about that for just a second. Did you ever think that on a day that Apple and most of the semis took the Nasdaq indexes lower that winners would beat losers at that exchange and that advancing volume would garner a majority share of the action among names listed at that exchange?
Of course, trading volume was lower across names listed at both exchanges, so we cannot take too much from what we saw on Monday, but it's still better than a punch in the nose or a sharp stick in the eye.
Better Macro?
Is the "industrial recession" over? I would not go that far, but it is worth noting that the Empire State (NY Fed Regional District) Manufacturing Index printed in a state of expansion for September. The headline print of 11.5, was far better than the -4.1 or so that economists were looking for. It was also the first positive headline print for the series since December 2023. Most of the key components within the report also showed growth. New orders, unfilled orders, and shipments all moved into positive territory, albeit off of extremely low levels. Still, a stat must be made somewhere.
Unfortunately, within the survey... prices paid continued to expand rapidly, and employment continued to contract. That said, the average workweek grew, and that's key to slowing or halting further decay in that category. We'll take this series one month at a time, so we don't get ahead of ourselves, but this was nice to see. The arguably more important Philadelphia Fed Manufacturing Index will cross the tape on Thursday morning.
He Said, She Said
On Monday afternoon, Jean Boivin, head of BlackRock BLK Investment Institute said, "Markets have been quick to price in rate cuts after the Fed finished its fastest hikes since the 1980s -- and price them out when inflation spooked to the upside. As the Fed readies to start cutting, markets are pricing in cuts as deep as those in past recessions. We think such expectations are overdone."
Elsewhere, JP Morgan's JPM head of global research Joyce Chang stated, "We're still sticking with the 50-basis point call (for Wednesday)." Chang sees potential recession risk for later in 2025 but added that this risk is "not imminent right now." For that reason, Chang said, "The Fed's tone, no matter what, I think is going to be relatively dovish."
Fed Funds futures trading in Chicago are currently pricing in a 67% probability for a reduction of a half-percentage point to be made to the Fed's target range for its short-term benchmark rate tomorrow afternoon and a 33% chance for a quarter-point cut. This market is still pricing in a 64% likelihood for one-and-a-quarter percentage points worth of cuts by year's end. That's pretty deep.
Heads Up! Salesforce Chat
Salesforce CRM CEO Marc Benioff will deliver his keynote address from the Dreamforce 2024 conference at San Francisco, California this afternoon at 1 p.m. ET.
And Another Heads Up: Palantir Stock
Sarge favorite Palantir Technologies PLTR closed above my $36 target price on Monday, and I have seen it trade close to $37 through the zero-dark hours on Tuesday morning. As readers and former "Stocks Under $10" subscribers know, we're sitting on a more than six-bagger here. I'll be back to address this and further my plan in a follow up piece of its own later today.
Economics (All Times Eastern)
08:30 a.m. - Retail Sales (Aug): Expecting 0.0% m/m, Last 1.0% m/m.
08:30 - Core Retail Sales (Aug): Expecting 0.2% m/m, Last 0.4% m/m.
08:55 - Redbook (Weekly): Last 6.5% y/y.
09:15 - Industrial Production (Aug): Expecting 0.2% m/m, Last -0.6% m/m.
09:15 - Capacity Utilization (Aug): Expecting 77.9%, Last 77.8%.
10:00 - Business Inventories (Jul): Expecting 0.4% m/m, Last 0.3%m/m.
10:00 - NAHB Housing Market Index (Sep): Expecting 40, Last 39.
1:00 p.m. - Twenty Year Bond Auction: $13B.
4:30 p.m. - API Oil Inventories (Weekly): Last -2.79M.
The Fed (All Times Eastern)
Fed Blackout Period.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: FERG (2.87)
At the time of publication, Guilfoyle was long PLTR equity.
