S&P 500 Down 1.8%, Nasdaq Drops 2.9%

Alexander Garcia
24 Jul, 2024
Miami

Stock market indexes on Wall Street extended morning losses after mega-cap companies reported lower than expected earnings. 

The S&P 500 index and the Nasdaq Composite declined, more than 1.8% and nearly 3% respectively, after traders reviewed the latest quarterly results from Google-parent Alphabet and Tesla. 

Alphabet reported better-than-expected quarterly revenue and earnings, but YouTube revenue disappointed some analysts. 

Tesla plunged more than 10% after the electric vehicle maker reported a 2% increase in overall revenue, but automotive revenue fell 7% in the second quarter. 

Tesla is losing market share to a growing list of competitors, and Tesla's discounts and financial incentives in the U.S. and China also hit the company's profitability. 

Meta, Microsoft, Nvidia, and Amazon dropped more than 1% after Tesla and Alphabet reported weaker-than-expected quarterly results. 

 

New Home Sales In June Confirm Declining Trend

Sales of new single-family houses in June declined 0.6% from the previous month to a seasonally adjusted annual rate of 617,000, according to the U.S. Census Bureau and Department of Housing and Urban Development. 

The high home prices, elevated mortgage rates, and higher base for property tax continue to weigh on buyers' affordability. 

The annual rate declined to the lowest in the last seven months, and May house sales data were revised higher to an annual pace of 621,000. 

The median sales price of new houses sold in June was $417,300, the highest since March, while the average sales price was $487,200, the lowest since January 2023. 

Sales in the Northeast declined 7.7% to 12,000 and in the Midwest fell 6.9% to 81,000; however, sales rose 1.4% to 149,000 and edged up 0.3% to 375,000. 

Homes are taking longer to sell, and the available home supply at the end of June increased to 9.3 months at the current sales rate. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index decreased 1.7% to 5,462.17, the Nasdaq Composite fell 2.8% to 17,497.73, and the Russell 2000 index fell 0.5% to 2,232.55.

The yield on 2-year Treasury notes edged lower to 4.41%, 10-year Treasury notes increased to 4.24%, and 30-year Treasury bonds edged higher to 4.48%.

WTI crude oil increased $0.06 to $78.02 a barrel, and natural gas prices edged down 5 cents to $2.14 a thermal unit.

Gold increased by $6.62 to $2,414.88 an ounce, and silver decreased 7 cents to $29.12. 

The dollar index, which weighs the US currency against a basket of foreign currencies, edged lower to 104.17.

 

U.S. Stock Movers 

Tesla plunged 12.2% to $216.18, and the company reported a drop in its automotive unit sales declined for the second quarter in a row. 

Moreover, the company's discounts and financial incentives lowered its profitability. 

Revenue in the second quarter increased 2% to $25.5 billion from $24.9 billion, net income attributable to shareholders plunged 45% to $1.5 billion from $2.7 billion, and diluted earnings per share plunged to 52 cents from 91 cents a year ago. 

Alphabet dropped 3.9% to $176.49 after the parent company of Google reported better-than-expected quarterly results, but YouTube's revenue disappointed investors. 

Revenue in the second quarter increased 14% to $84.7 billion from $74.6 billion, net income rose to $24.6 billion from $18.4 billion, and diluted earnings per share increased to $1.89 from $1.44 a year ago. 

YouTube revenue increased to $8.6 billion from $7.6 billion, Google cloud revenue rose to $10.3 billion from $8.0 billion, and Google search revenue jumped to $48.5 billion from $42.6 billion a year ago, respectively. 

 

European Indexes Declined, Private Sector Growth Stalled

European market indexes declined after business activities stagnated in the eurozone, and earnings season picked up pace. 

Benchmark indexes in Paris, London, and Frankfurt struggled to advance and lost as much as 1% amid worries of economic growth. 

The HCOB Eurozone Composite PMI eased to 50.1 in July from 50.9 in June, according to a preliminary estimate released by S&P Global. 

The index dropped to a five-month low, and the latest reading signaled near stagnation in the currency union as the fragile economic recovery continues to lose steam. 

Manufacturing sector activities contracted to 45.6 from 45.8, and the service sector slowed to 51.9 from 52.8. 

The economic backdrop was weaker in two of the largest economies in the region; business activities declined in Germany for the first time in four months, and in France, growth eased for the third consecutive month. 

 

Europe Indexes and Yields

The DAX index decreased by 0.9% to 18,387.46; the CAC-40 index declined by 1.1% to 7,513.73; and the FTSE 100 index fell by 0.2% to 8,153.69.

The yield on 10-year German bonds edged lower to 2.43%, French bonds inched higher to 3.12%, the UK gilts inched higher to 4.13%, and Italian bonds increased to 3.77%.

The euro edged lower to $1.08; the British pound inched higher to $1.29; and the U.S. dollar weakened to 88.53 Swiss cents.

Brent crude increased $1.04 to $82.05 a barrel, and the Dutch TTF natural gas fell by €1.38 to €32.73 per MWh.

 

Europe Stock Movers

Informa PLC jumped 3.9% to 880.40 pence after the company agreed to acquire Ascential plc for £1.2 billion or $1.5 billion. 

Marston's PLC rose 2.9% to 39.25 pence, and the pub operator reported positive momentum for the 16-week period. 

LVMH dropped 4.4% to €663.20 after the luxury goods maker reported weaker-than-expected second quarter results, raising the prospect of a wider slowdown in the industry. 

Revenue in the first half declined 1% to €41.7 billion from €44.3 billion, and net profit declined 14% to €7.3 billion from €8.5 billion. 

Hermes declined 1.8% to €2,045.0, Kering dropped 4.4% to €301.45, and Richemont fell 1.1% to CHF 134.0. 

Remy Cointreau decreased 0.4% to €70.55 after the spirit maker reported a wider-than-expected decline in first-quarter sales of 15.6%.

Deutsche Bank dropped 6.1% to €14.72, and the German bank reported its first quarterly loss in four years.

BNP Paribas fell 1% to €64.08, despite the French financial service company reporting second-quarter earnings that surpassed market expectations. 

 

Nikkei and Topix Extended Weekly Losses After Factory Activity Unexpectedly Shrank 

Benchmark indexes in Tokyo dropped more than 1% after business activity indexes declined in July.

Market sentiment was weak after the Au Jibun Bank Japan Manufacturing Purchasing Managers' Index eased to 49.2 in July from 50.0 in June, indicating the first decline in factory activities since April. 

The manufacturing sector growth has been volatile this year, and growth eased for the fifth time, data from S&P Global showed. 

On the other hand, service sector PMI rebounded to 53.9 in July from 49.4 in June, increasing to a 3-month high. 

Any reading above 50 shows growth, and below 50 shows a decline in activities. 

The yen rebounded to 154.56 against the U.S. dollar in the hopes that the Bank of Japan may signal rate increases as early as next week at the policy meeting on July 31. 

 

Japan Stock Movers

The Nikkei 225 stock average decreased 1.1% to 39,154.85, and the Topix index fell 1.4% to 2,793.12. 

Tech stocks advanced ahead of the start of the earnings season later in the week. 

Advantest, Tokyo Electron, and Lasertec declined around 1%, and Screen Holdings gained 1.9%. 

Asics Corp. declined 2% to ¥2,468.0, and the sportswear company priced its secondary offering of 75 million shares at 2,442.50 per share, raising about 180.5 billion yen. 

Honda Motor declined 2.6% to ¥1,630.0 after the vehicle maker recalled prologue SUVs for defective control links. 

A week ago, Honda Motor priced its secondary stock offering at 1,664 yen per share and raised 497 billion yen, or $3.2 billion.

 

China Indexes Erase 2024 Gains, Chow Tai Fook Sales Drop 20% 

Investors focused on corporate results as the earnings season kicked off, and market sentiment was cautious as property market malaise showed no signs of easing. 

Stocks in Hong Kong and Shanghai declined on the worry that the recent flurry of salary cuts announced in the financial sector are going to create another headwind for property prices in tier-1 cities. 

Property prices have been still rising in the tier-1 cities, unlike smaller cities where prices have declined for the third year in a row. 

However, prices have started to soften in Shanghai, Beijing, and Shenzhen after the latest cuts in staff and salaries in the financial services industry. 

Investors were cautious after the jewelry retailer Chow Tai Fook said sales in the latest quarter declined 20% from a year ago. 

Li Auto and other electric vehicle makers declined after Tesla reported weaker-than-expected earnings in the second quarter. 

The two widely followed indexes, the Hang Seng index and the CSI index, have nearly erased this year's gains amid a weak economic growth outlook, a protracted property market slump, and weakening consumer confidence. 

 

China Stock Movers 

The Hang Seng index declined 0.8% to 17,338.51 and the CSI 300 index dropped 0.5% to 3,423.40. 

Chow Tai Fook Jewelry Group Ltd. dropped 5.5% to HK$7.49 after the retailer reported weak quarterly results. 

Same store sales in Mainland China plunged 26.4% and in Hong Kong declined 30.8% from a year ago, respectively. 

Same store average selling price of gold jewelry was resilient, and in Mainland China it rose to HK $6,200 from HK $5,400, and in Hong Kong and Macau it increased to HK $8,900 from HK $8,400. 

Electric vehicle makers declined after Tesla reported weaker-than-expected quarterly earnings.

Li Auto declined 4.4% to HK $74.25, BYD dropped 2.7% to HK $232.0, and Xpeng decreased 5.5% to $32.10. 

Tech stocks also traded volatile amid market anxieties ahead of the start of the earnings season. 

Tencent Holdings declined 0.7% to HK $363.40, Alibaba Group increased 0.7% to HK $74.45, Baidu fell 0.5% to HK $87.85, and Meituan dropped 4.7% to HK 105.10.