Markets
Luke Kawa

US stocks sink on momentum unwind, mounting growth fears

It was a risk-off day, with stocks slumping while bonds rallied briskly amid data pointing to an unexpected cooling in the US services sector in February and deteriorating consumer confidence.

The S&P 500 tumbled all the way down to its 50-day moving average, closing 1.7% lower.

The Nasdaq 100 declined 2.1% while the Russell 2000 gave back 2.9%.

There was a decidedly defensive tenor to the S&P 500 sector ETF price action: consumer staples were the best-performing sector, up more than 1%, utilities were flat, and all other sectors declined. Tech, consumer discretionary, industrials, and energy were all off more than 2%.

The brisk retreat in the benchmark index over the past two sessions has the hallmarks of a momentum unwind catalyzed by Walmart’s lackluster outlook: the iShares MSCI USA Momentum Factor ETF fell nearly twice as much as the S&P 500 in the final couple trading days of the week. Walmart, for its part, extended yesterday’s losses to close below its 50-day moving average for the first time since August.

Flows related to this month’s options expiry may have played a role in the magnitude of the downdraft.

Nvidia, for instance, had a significant amount of open interest in calls expiring on Friday with a strike price of $140. While the stock opened around that level, the value of those contracts plummeted as shares dipped lower, likely exacerbating the selling pressure on the stock.

A few bright spots on the tape: Celsius spiked after announcing a deal to buy Alani Nu, which is popular among Gen Z. It’s a day ending in y, so Alibaba rallied strongly, this time on reports that GameStop CEO Ryan Cohen upped his stake in the Chinese e-commerce and cloud giant to about $1 billion.

Hims & Hers cratered after the FDA said weight-loss drugs Ozempic and Wegovy are no longer in a shortage, which curbs its ability to sell copycat editions. The news was a boon for Novo Nordisk, however.

Luxury reseller The RealReal also plummeted after issuing full-year forecasts for revenues and adjusted EBITDA that came in light relative to analysts’ expectations.

Probes also weighed on certain companies’ shares to end the week. UnitedHealth sold off on a report that the DOJ is investigating its Medicare billing practices. Meanwhile, CrowdStrike is reportedly under scrutiny by both the DOJ and SEC.

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SpaceX received more than a dozen positive analyst calls on Tuesday — including from major Wall Street banks — as they initiate coverage on Elon Musk’s space and AI company.

SpaceX went public on June 12 at a $2.2 trillion valuation, the largest debut in history. While the company hasn’t yet posted a profit, it seems to have convinced Wall Street that it will get there and grow its valuation on the way.

Of the at least 17 analysts that gave a rating on Tuesday, all but one gave it a “buy” or “outperform” rating. MoffettNathanson was "neutral."

The ratings come as SpaceX joined the Nasdaq 100 index, a benchmark tech-heavy basket of companies that underpins millions of portfolios. The inclusion adds built-in demand for the stock from index funds and ETFs.

Still, SpaceX fell more than 5% on Tuesday amid a broader sell-off, and is currently effectively flat from its opening price of $150 a share.

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Nike sinks to lowest level since 2014 after warning of “challenged” sales environment in Q4 report

Did Nike do it?

Investors had a mixed reaction after the global sports apparel company reported its fourth quarter earnings on Tuesday after the bell. Shares initially rose 5% as Nike beat out Wall Street expectations amid a hefty tariff refund bonus. However, the stock then sank to its lowest level since August 2014 in postmarket trading.

Here are the Q4 numbers:

  • Revenue of $11.0 billion (estimate: $10.8 billion).

  • Adjusted earnings per share of $0.20 (estimate: $0.12).

Ahead of this report, Nike warned that results would be flattered by a one-time tariff refund (now estimated at roughly $0.52 per share for the bottom line). That gave the company an extra cushion in snapping its streak of seven quarters of year-over-year profit declines.

Over the past year, the company had been punished by tariffs on imported goods, stagnant consumer spending, and increasing competition from other footwear brands like New Balance, Adidas, and Hoka.

Outgoing CFO Matthew Friend deemed it an “increasingly challenging operating environment, where sell-through remains challenged.”

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