To The Moon

The stock market began the fourth quarter on a weak note. Expectations for consolidation activity grew after a strong third quarter.

Initial reports suggested the White House was concerned about a potential Iranian strike on Israel. This concern materialized, but subsequent reports indicated that most of Iran's missiles were destroyed by Israel's defense system.

We saw major indexes closed lower on 01 Oct (Tuesday), retreating from recent record highs as technology stocks tumbled, while crude oil prices jumped on concerns about escalating tensions in the Middle East.

The DJIA fell 0.41%, while the S&P 500 and NASDAQ dropped 0.93% and 1.53%, respectively. The major indexes were giving back the gains from 30 Sep (Monday), when the DJIA and S&P 500 hit record closing highs to cap off a strong month and quarter. The S&P 500 gained 21% over the first three quarters of the year, its best start to a year so far this century.

Gold Neared Record Highs and Oil Erased Earlier Losses

The conflict in the Middle East intensified as Israel's defense forces reported that Iran launched about 200 missiles at the country. The Biden administration is working to defuse tensions. While most missiles were intercepted, Israel plans to retaliate.

Crude oil futures jumped as much as 5% as reports came in that Iran fired missiles into Israel in the latest escalation of conflict in the Middle East. Those gains moderated to around 3.5% in late-afternoon trading.

Gold futures were up nearly 1% at around $2,690 an ounce, nearing a fresh record high, while bitcoin fell to around $62,000 and was trading near a two-week low.

Note Yield Lower Also

The 10-year note yield was down ten basis points to close at 3.727% while 2-year note yield was also down six basis points to settle at 3.609%.

S&P 500 Energy Sector Top The Group On OIl Rose

Shares of energy and oilfield services companies moved higher in tandem with the rise in oil prices, with Marathon Oil (MRO), ConocoPhillips (COP), Occidental Petroleum (OXY) and Halliburton (HAL) all solidly higher. Defense contractors, including Northrop Grumman (NOC) and Lockheed Martin (LMT), also gained ground amid the rising Middle East tensions.

That helped the energy sector to gain +2.24%, utilities and communication services sector also gained +0.81% and +0.40% respectively.

The worst performer was information technology losing -2.66% as large-cap tech stocks, which have underpinned the broader market's gains this year, led the move lower on Tuesday.

AI investor favorite Nvidia (NVDA) closed 3.7% lower, while Apple (AAPL) fell 2.9% amid concerns about soft iPhone 16 demand. Microsoft (MSFT) and Amazon (AMZN) also lost ground, while Meta Platforms (META) and Alphabet (GOOGL) both gained less than 1%.

The VanEck Semiconductor ETF (SMH) fell 2.7% as Intel (INTC), Broadcom (AVGO), Micron (MU) and other chip stocks fell sharply.

Stocks To Watch

$Nike(NKE)$ reported Q1 GAAP EPS of $0.70, surpassing estimates by $0.18. However, revenue of $11.6 billion fell short by $50 million, marking a 10.4% year-over-year decline. Direct revenues were down 13% at $4.7 billion, and wholesale revenues dropped 8% to $6.4 billion. Despite these declines, gross margin improved by 120 basis points to 45.4%. The company postponed its previously announced Investor Day. Inventories decreased by 5% to $8.3 billion, while cash and equivalents rose by $1.5 billion to $10.3 billion.

I think investors are still losing confidence on Nike, especially now that they will be postponing their investor day, I would think that Nike might be trading lower over the next few weeks. Especially with the middle east conflict developing, we might see more impact on Nike.

Semiconductor stocks faced significant pressure due to escalating geopolitical tensions between Israel and Iran. Nvidia (NVDA) shares dropped 3.7%, while Intel (INTC) and Micron (MU) saw losses of 4.5% and 3.7%, respectively.

Nvidia halted the development of its GB200 NVL36*2 dual-rack 72 GPUs. Apple (AAPL, Financial)-related semiconductor stocks also fell, with Qualcomm (QCOM) losing 2.8%, Skyworks Solutions (SWKS) down 3.9%, and Qorvo (QRVO) dropping 3.3%. Analog suppliers like Texas Instruments (TXN), NXP Semiconductors (NXPI), and Analog Devices (ADI) also experienced declines between 3% and 4%.

$Apple(AAPL)$ is set to unveil a new iPhone SE and iPad Air next year. The new iPhone SE will be based on the iPhone 14, featuring an edge-to-edge screen and no home button. The new iPad Air models will include internal improvements and support for the Magic Keyboard. Apple is also expected to introduce new versions of several Mac computers this month.

Looks like the news of the new iPhone SE and iPad Air next year does not excite the investors so we might be seeing downside over the next few weeks from Apple.

U.S. aerospace and defense companies like $Lockheed Martin(LMT)$ , Northrop Grumman (NOC), and RTX (RTX) saw gains as Iran attacked Israel with ballistic missiles. The attack followed Israel's killing of Hezbollah leader Hassan Nasrallah and an Israeli military invasion of southern Lebanon. The U.S. has pledged to support Israel in its defense efforts.

If the conflict is going to continue for a while, we can look at LMT for a short term trade, though we have seen a gap up, I believe there is some more room to play.

Tesla (TSLA) shares traded lower ahead of its Q3 deliveries report, expected to be around 462,250 vehicles. The company faces rising competition from Chinese EV makers like NIO (NIO), XPeng (XPEV), BYD Company (BYDDF), Li Auto (LI), and ZEEKR Automotive (ZK), all of which reported strong year-over-year delivery growth.

$Longboard Pharmaceuticals, Inc.(LBPH)$ jumped 11.5% amid speculation of takeover interest from a U.S. West-coast biotech company. The company has a market cap of $1.3 billion and a short interest of 12%.

LBPH MACD and KDJ is showing upside build up, so I am expecting some positive price action today (02 Oct), I will be monitoring to take a possible price target.

Summary

I think we might still see weak note today (02 Oct) as investors would start rotating out of tech stocks amidst the fears of longer period of conflict in the middle east. We might want to look at defense stocks and also some defensive stocks like healthcare.

Appreciate if you could share your thoughts in the comment section whether you think market would continue the weak trend today (02 Oct).

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.