The Dow Jones Industrial Average fell Tuesday after the latest home sales and consumer confidence reports stoked concern over the state of the U.S. economy.
The Dow lost 388.00 points, or 1.14%, to 33,618.88 in its worst day since March. The 30-stock index closed below its 200-day moving average for the first time since May.
Amazon shares fell 4% — the most of the mega-cap tech stocks — after the Federal Trade Commission filed an antitrust lawsuit, saying the online retailer keeps prices artificially high and hurts rivals.
August new home sales missed expectations. Homes under contract totaled 675,000 for the month, down 8.7% from July, according to the Commerce Department. Economists polled by Dow Jones anticipated a total of 695,000, which would have represented a 2.7% fall from unrevised July totals.
The Conference Board's consumer confidence index fell to 103 in September, down from 108.7 in August. Economists were anticipating 105.5, according to consensus estimates from Dow Jones. The expectations index tumbled to 73.7, below the level that observers associate with recessions.
JPMorgan Chase CEO Jamie Dimon warned interest rates may need to rise further to tamp down inflation, comments that added to bearish sentiment Tuesday. Bank stocks declined, with the SPDR S&P Regional Banking ETF (KRE) falling more than 1%. Wells Fargo shares dropped about 2%, while Morgan Stanley fell 1%.
Those moves would add to the market's losses for the month. The Nasdaq Composite is down nearly 7% in September, while the S&P 500 and Dow lost more than 5% and 3%, respectively. Among the catalysts dragging stocks lower this month is the Federal Reserve's warning that it sees fewer rate cuts next year. The news pushed the benchmark 10-year Treasury yield to levels not seen since 2007.
"Investors are still on edge, nervous, about what the rise in bond yields have to say about the economy, about the stock market, about the Fed, as well as the value of the dollar," said Sam Stovall, chief investment strategist at CFRA Research. "I think investors lack clarity and therefore are deciding to lighten up."
Investors this week are also grappling with negotiations in Washington, as lawmakers hope to avert a government shutdown that could take place as early as Oct. 1 if Congress doesn't agree on a spending bill.
Still, upcoming seasonal market tumult could present a window for investors. Though October is known as the "jinx month" because of the 1929 and 1987 crashes, it also has a reputation as a "bear killer," according to the "Stock Trader's Almanac."
— CNBC's Jeff Cox contributed to this report.
Stocks close lower Tuesday
The major averages closed lower Tuesday.
The Dow Jones Industrial Average lost 388.00 points, or 1.14%, to 33,618.88 in its worst day since March. The 30-stock index closed below its 200-day moving average for the first time since May.
— Sarah Min
Wall of corporate debt refinance starting in 2024 is another stock market headwind
Corporate debt refinancings are going to start hitting profits more urgently starting in 2024, according to Wolfe Research chief investment strategist Chris Senyek.
"Refi's are going to become a much bigger factor next year," Senyek said in a note Tuesday. "[T]hat higher interest expense is likely to create a $5-$7/share headwind for S&P 500 operating EPS in 2024." Wolfe sees S&P 500 operating EPS falling 4.5% in 2024 to $210 whereas the market consensus is for 12% growth to $249.
Wolfe included a table showing $903 billion in U.S. corporate debt (excluding financial companies) coming due in 2024, up 343% from $204 billion in 2023. That rises another 42% in 2025 to $1.28 trillion and 15% in 2026 to $1.47 trillion, before starting to come down.
Senyek also wrote that he now expects yields on the 10-year Treasury note to climb to 5% before the end of 2023, fueled by a wall of U.S. Treasury debt issuance, higher oil prices and the Bank of Japan easing off on its yield curve control policy.
— Scott Schnipper, Michael Bloom
Current market correction will create better opportunities for small-caps in 2024, says Citi's Steven Wieting
Hawkish signaling from the Federal Reserve may have put downward pressure on equities in recent weeks, but Citi Global Wealth's Steven Wieting believes that the current correction will make way for better investing opportunities in 2024, especially for smaller companies.
As the U.S. central bank has rationed down the availability of credit in the economy, the firm's chief investment strategist told CNBC that investors have been "focused only on the largest and safest balance sheets," pushing up shares of super large-cap companies.
The way forward is not to take a negative view of the leading large-cap stocks, but rather to focus positively on the growth stocks that have been left behind, Wieting said. For instance, small- and mid-cap growth names are currently trading at nearly a 40% discount against large-caps, despite growing earnings more rapidly over the long term, the analyst said.
"It really doesn't mean you have to take a negative view of companies that have benefited from AI or EV at the highest levels, but I think the real return opportunity will be with broadening," Wieting added. "It's increasingly something that we're looking forward to do to doing with more small-caps in portfolios, particularly on a pullback in markets which we seem to be getting."
— Lisa Kailai Han, Sarah Min
Biggest gold ETF under pressure
The market's largest gold ETF is not doing much to protect investors from the recent decline in stocks and bonds.
The SPDR Gold Shares fund (GLD) was tracking toward its third negative session in four on Tuesday afternoon. The fund is now down about 2% month to date.
Gold could conceivably get a boost as the odds of a U.S. government shut down rise, but the non-yielding metal may be hard sell for investors when interest rates are climbing.
— Jesse Pound
Evercore ISI lifts Micron price target ahead of earnings
Evercore ISI is getting a little more bullish on Micron Technology heading into Wednesday's earnings report.
Analyst Matthew Prisco lifted his price target on the memory chipmaker to $90 from $80 a share, saying that Micron looks well situated for a modest beat and guidance raise as pricing and bit volume trends improve.
After an "unprecedented downturn and memory utilization cuts, we believe Micron is positioned for strong EPS reacceleration, which will continue to gain momentum as the company regains lost market share related to the [Cyberspace Administration of China's ban] while resuming more meaningful cost downs," he wrote in a Tuesday note.
Prisco also expects Micron to get a lift from artificial intelligence as data-heavy models rely on higher-bandwidth memory. He also forecast that earnings power can approach $10 by the 2025 calendar year.
Micron shares have rallied 36% this year, with Evercore ISI's price target implying about 31% upside from Monday's close.
— Samantha Subin
Wingstop shares climb on Stifel buy rating
Stifel analyst Chris O'Cull upgraded Wingstop to buy from hold and assigned a price target of $200, implying shares stand to gain more than 15% from Monday's close.
Shares of Wingstop climbed 2.5% on Tuesday.
"We believe the company is poised to successfully lap difficult comp comparisons in the 2H23 as menu innovation and delivery channel growth, augmented by rapid expansion in the national ad fund, continue to build top-of-mind awareness and drive incremental usage," O'Cull said in a Monday note. "The company's growing scale also translates into better visibility into long-term food costs."
O'Cull added that greater advertising, new products and incremental delivery partnership, as well as the company's domestic space and international growth, make it "unlikely that development will slow soon."
— Pia Singh
Major bond ETFs trading near lowest level in more than a decade
The latest spike in Treasury yields has dragged down some of the biggest bond funds in the market to new milestones.
The iShares 20+ Year Treasury Bond ETF (TLT) closed at $89.18 on Monday, which was its lowest close since Feb. 10, 2011, according to FactSet. Other major bond funds are trading at similar levels relative to history.
And the sell-off could get worse. Some Wall Street pros see a chance that the benchmark 10-year Treasury yield can can climb to 5%.
Read more about the impact of changing yields on bond funds at CNBC Pro.
— Jesse Pound
Wall Street is watching to see if Costco raises its membership fee
Analysts are expecting a solid earnings report out of Costco after the bell, but focus is on a number that can't be found in the top or bottom line: membership fees.
Bernstein analyst Dean Rosenblum said he'll be watching to see if there's a fee increase, as well as for insights into how a recent crackdown on membership sharing has impacted the company. He said the company is like due for an increase of around $5 based on historical data, which shows an increase of about that amount every half decade.
"Now that food inflation has abated somewhat, Costco may capitalize on the moment and plan for a fee increase," he said in a note to client last week.
But UBS analyst Michael Lasser said the wholesale retailer will likely hold off until next year, citing previous commentary from management around the topic.
"In the past year, COST signaled several times that it was not ready to raise its membership fees given the cost pressures its members were experiencing," Lasser told clients last week.
— Alex Harring
Dow drops to session lows in early afternoon trading
The Dow Jones Industrial Average dropped to session lows in early afternoon trading on Tuesday. The index fell more than 400 points, or 1.2%, setting it up for its biggest one-day slide since March 2023.