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Global Markets Drag Stocks Lower; China Hacks Apple

Stocks hunkered down at the start of trade Thursday as bond- and dollar-related weakness dragged on global markets.




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Techs and small caps led the early selling, with the Nasdaq Composite diving 0.9% and the S&P Smallcap 600 down 0.6%. The Dow Jones industrial average and the S&P 500 each traded 0.3 % lower.

Cisco Systems (CSCO) led the downside among Dow stocks. Constellation Brands (STZ) surged on its fiscal second-quarter performance. Eli Lilly (LLY) jumped to another new high following positive clinical trial results. Smith Micro Computer (SMCI) collapsed 30% as investors looked into news reports that a hardware hack by China’s military had potentially affected Apple (AAPL) and Amazon.com (AMZN).

China Hacks Hardware Used By Apple, Amazon

Super Micro shares dived 32% in opening trade. Apple and Amazon posted modest early losses, down 0.2% and 0.4%, respectively. Bloomberg revealed an ongoing U.S. intelligence investigation into Smith Micro products used by U.S. companies that potentially provided China long-term surveillance of sensitive U.S. military and intelligence operations. The report said server motherboards assembled in the U.S. but which included components manufactured in China included a rice-grain size chip that U.S. officials say was inserted during the manufacturing process “by operatives from a unit of the People’s Liberation Army,” according to Bloomberg.

The motherboards were assembled by San Jose-based Super Micro. Apple and startup company Elemental Technologies, acquired by Amazon in 2015, were Super Micro customers. Investigators reportedly found the hack had affected almost 30 companies. All three companies have disputed aspects of the Bloomberg account, the news agency said, and the FBI and the Office of the Director of National Intelligence declined to comment.

Cannabis Stocks Turns Mixed After Constellation Report

Alcohol producer Constellation Brands jumped 5.4% as fiscal second-quarter results cleared analyst targets by a wide margin. Constellation entered the cannabis arena with a multi-billion dollar investment in Canopy Growth a year ago. The stock is attempting to retake support at its 10- and 40-week moving averages.

Marijuana stocks pointed to another day of volatility. Tilray (TLRY) slumped 2.7% in early action, on news that the company planned a $400 million offering of convertible debt. Canopy Growth (CGC) gained 1%, Cronos Group (CRON) fell 1%. India Globalization Capital (IGC) tumbled 17% and New Age Beverage (NBEV) surged more than 6%.

Eli Lilly Jumps; Cisco Slips

Eli Lilly vaulted 5.4% higher, after reporting a type 1 diabetes treatment showed positive results in a stage 3 clinical trial. Lilly shares are taking out new highs, up 22% since clearing a nine-month saucer base in July.

Cisco cared 1% decline, set to consolidate gains after a four-day rally. The network gear maker has been pecking out new highs, and is narrowly extended above a 46.47 buy point in a three-month flat base.

In other early stock news, data analytics leaders Cloudera (CLDR) and Hortonworks (HDP) surged after agreeing to a merger of equals late Wednesday.

HP (HPQ) jumped more than 2% after announcing it would raise its dividend 15%.

Econ News: Layoffs Surge, Jobless Claims Down

U.S. employers announced 55,285 layoffs in September, according the Job Cuts Report from Challenger, Grey & Christmas. That was 44% above August’s levels, and 70% above layoffs announcd in September a year ago. Nearly half of the job cuts came from Wells Fargo, which plans to eliminate 26,500 jobs over the next three years.

First-time unemployment claims declined to 207,000 in the week ended Sept. 29, the Labor Department reported. That was down from 215,000 claims in the prior week and below consensus expectations for 213,000 claims. It also was close to the 202,000 claims marked in the week ended Sept. 15, which marked a 49-year low.

Bond Sell-Off Hits Global Markets

Strong economic data sent bonds lower Wednesday, and the selling received a late boost from Fed chief Jerome Powell. He said during a mediated discussion in Washington that the U.S. economy was a long way from neutral monetary policy, stirring speculation that the Fed could ratchet up rates further and faster than previously anticipated.

The bond selloff spilled out across global markets, sending stocks in Asia and Europe sharply lower. U.S. Treasurys leveled off early Thursday, leaving the 10-year yield unchanged at 3.18%.

Hong Kong’s Hang Seng Index responded with its third straight dive, closing 1.7% lower and tracking toward its worst weekly loss since the onset of the U.S.-China trade war in February.  Markets in Shanghai and Shenzhen remain closed for China’s Golden Week holiday.

In Japan, the Nikkei 225 dropped 0.6%, pulling back for a second day from the 27-year high notched on Tuesday.

Europe’s markets turned sharply mixed in afternoon trade. The CAC-40 in Paris and London’s FTSE 100 were off early lows, but down 1% and 0.9%, respectively. Frankfurt’s DAX reversed its early losses and gained 0.4%, as the exchange reopened and played catch-up after a one-day holiday.

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