Markets News, July 17, 2024: Nasdaq, S&P 500 Close Sharply Lower; Dow Rises to New Record

Wednesday's Biggest S&P 500 Movers

Decliners

• Geopolitical uncertainty dragged down the tech sector following reports that the U.S. is considering rules that would rein in exports of semiconductor equipment to China. Shares of companies in the semiconductor industry dominated the list of the S&P 500's weakest daily performers. Equipment suppliers Applied Materials (AMAT), Lam Research (LRCX), and KLA Corp. (KLAC) all dropped roughly 10%. So did Advanced Micro Devices (AMD). Several other S&P 500 chipmakers were down in the 8% to 9% range.
• Vistra Corp. (VST) shares sank 11.3%, the steepest losses of any S&P 500 stock. The utility stock posted outsized gains in the first half of 2024, driven by optimism that it could benefit from a boost in energy demand from data centers running artificial intelligence (AI) applications, but it has changed course in July. The losses come amid questions about the power grid in the company's home state of Texas after significant outages in the wake of Hurricane Beryl.
• The wind came out of shares of GE Vernova (GEV), spun off from the GE conglomerate in April, which plunged 9.3%. The independent power company's shares lost ground amid anticipation of a potential return to the presidency for Donald Trump, who has been a vocal opponent of generating energy using wind turbines, which account for a major part of GE Vernova's business.
  

Gainers

• Another April spinoff fared much better on the day. Shares of Solventum (SOLV), the health care firm that separated from 3M (MMM), notched the best performance in the S&P 500, gaining 5.9%. Although Morgan Stanley cut its price target on Solventum stock earlier this week, analysts said they still have a favorable outlook for the medical technology industry, forecasting strong utilization and volumes.
• Progressive (PGR) shares were up 5.4%, reversing losses posted in the previous session after the property and casualty insurer posted mixed quarterly results. Although revenue came in shy of estimates, profits were better than expected, and analysts noted strength in Progressive's underwriting profitability.
• Shares of dental and medical products supplier Henry Schein (HSIC) also added 5.4%. The company cut the ribbon last week on a new distribution center in Fort Worth, Texas. At 811,000 square feet, the new facility is the largest in Henry Schein's global network.
• FMC Corp. (FMC) shares advanced 4.6%. The agricultural sciences firm announced the appointment of John M. Raines to its board of directors. Raines arrives with more than three decades of experience that includes key roles at top food and agriculture companies.

-Michael Bromberg

Why Investors are Jumping Into Small-Cap Stocks

Rising expectations that the Federal Reserve will cut interest rates in September have powered small-cap stocks higher over the past week.

The reason: Lower rates are seen as beneficial to smaller companies, which generally have higher levels of debt than bigger ones and can be more susceptible to economic stress. Traders now appear certain the Fed will start cutting rates at its September meeting, an environment that has encouraged investors to pour money—at historic rates—into the stocks of companies with market values generally less than $2 billion.

The Russell 2000 Index (RUT), which slipped Wednesday after five days of gains, is up about 9% over the past five sessions, before which they were near-flat for the year. By comparison, the S&P 500 Index, has slid during those same five sessions, though it's up some 17% for the year.

The question now is how long the small-cap rally can continue in a stock market dominated for more than a year by several large, high-profile technology stocks.

Read more here about the resurgence of small-cap stocks.

-Lyle Niedens

First Horizon Stock Falls as NII Misses Expectations

Shares of First Horizon Corp. (FHN) fell Wednesday after the regional bank reported second-quarter results lower than analysts expected as lower net interest income (NII) hit its profits.

The parent of First Horizon Bank reported NII of $629 million, down slightly from the $631 million it reported last year. That helped lead to revenue coming in below estimates at $815 million, down from last year's $1.03 billion.

Banks at the national and regional level have in recent earnings reports largely reported lower NII as deposit costs have risen to offset the benefit of higher interest rates on loan payments. Analysts have projected that interest rate cuts that markets predict will happen this year will negatively impact banks' NII in the coming years.

Citizens Financial Group (CFG), which also reported earnings Wednesday, similarly posted lower NII than the same time last year, falling to $1.41 billion from $1.59 billion.

 Other regional banks reporting earnings this week include M&T Bank (MTB) and Fifth Third Bancorp (FITB).

-Aaron McDade

Chipmakers Plunge on Worries About Trade Curbs, Geopolitics

Nvidia (NVDA), Qualcomm (QCOM), and other chip stocks tumbled Wednesday following reports of potential government moves that could negatively impact the sector.

Especially hard hit were shares of ASML (ASML), which makes equipment to manufacture semiconductors, following reports the Biden administration is considering tightening restrictions on exports of semiconductor equipment to China.

The news overshadowed ASML's solid results on rising demand for artificial intelligence (AI) chips.

The White House is reportedly considering imposing what’s known as the foreign direct product rule, that would allows the U.S. to impose controls on products made outside the country that use even a small amount of American technology.

The measure could be used to target products from companies like the Netherlands’ ASML, which made nearly half of its revenue in the second quarter from sales to China and could take a hit from the move.

Separately, former President Donald Trump said in an interview with Bloomberg Businessweek that Taiwan should pay the U.S. for defense, raising concerns about how geopolitical tensions could affect the chip industry.

Taiwan dominates the global market for semiconductor manufacturing, thanks to TSMC (TSM), and American depositary receipts (ADRs) of the chip manufacturing giant plunged Wednesday as well.

-Bill McColl

Novo Nordisk, Eli Lilly Decline as Roche Weight-Loss Drug Shows Promise

A new non-injectable weight-loss drug from Swiss pharmaceutical firm Roche Holding AG has shown encouraging early stage data, sending shares of rival GLP-1 developers Eli Lilly and Company (LLY) and Novo Nordisk (NVO) lower Wednesday.

The once-daily pill, CT-996, delivered placebo-adjusted mean weight loss of 6.1% in obesity patients without diabetes, Roche said.

CT-996 represent possible competition to popular weight-loss drugs Novo Nordisk's Wegovy and Eli Lilly's Zepbound.

-Andrew Kessel

UnitedHealth Stock Continues Post-Earnings Surge

Shares of insurer UnitedHealth (UNH) continued gaining ground Wednesday, powering a move higher for the Dow, after jumping the previous session after a strong quarterly earnings report.

Taking a look at key chart levels, the share price staged a decisive close above the 50-week moving average but remains within a multi-year trading range.

The measuring principle, which calculates the distance between the range’s upper and lower trendlines and adds that amount to the top trendline, forecasts a target of $651.

Read the full technical analysis here.

-Timothy Smith

J&J Shares Jump After Earnings

Johnson & Johnson (JNJ) reported mixed second-quarter results Wednesday, as one-time costs caused the company to miss profit estimates despite better-than-expected sales.

The company's shares were up more than 3% Wednesday morning and were among the top gainers on the Dow. The stock is trading at its highest level since late April.

Sales of the company's pharmaceuticals and medical devices rose just over 4% from the same time last year to $22.45 billion, better than the $22.38 billion analysts had expected, according to consensus estimates compiled by Visible Alpha. However, profits fell short of estimates due to various one-time costs like legal fees and asset amortization costs.

The company also shifted its full-year guidance from the last time it updated the projections to account for the financial impact of recent acquisitions, raising its expectations for sales while also projecting lower profits than it had previously.

-Aaron McDade

Gold Extends Gains After Hitting Record High

Gold prices were on the move higher again, trading at around $2,480 an ounce, after hitting a record high Tuesday amid rising expectations that the Federal Reserve will lower its benchmark interest rate in September.

Falling rates increase the non-yielding commodity’s demand by reducing its opportunity holding cost relative to interest bearing assets, such as fixed-income securities.

The price of gold has broken out from a rectangle pattern, indicating a continuation of the commodity's current uptrend.

A bars pattern, which takes the trending price action between February and April and applies it to the rectangle’s breakout point, projects a price target of around $2,950.

Read our full technical analysis here.

-Timothy Smith

Major Index Stock Futures Sharply Lower

Futures tied to the Dow Jones Industrial Average were down 0.3%.

S&P 500 futures were down 0.9%

Nasdaq 100 futures were down 1.5%