What you need to know…
The S&P 500 Index ($SPX) (SPY) on Thursday closed down -0.85%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.75%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.85%.
Stocks on Thursday closed moderately lower, with the S&P 500, Dow Jones Industrials, and Nasdaq 100 falling to 1-1/2 week lows. Rising bond yields on Thursday pressured stocks after the 10-year T-note yield climbed to a new 16-year high. Also, an unexpected decline in U.S. weekly jobless claims to an 8-3/4 month low signaled labor market strength that may prompt the Fed to keep interest rates higher for longer.
Corporate quarterly earnings results were mixed for the market. Tesla tumbled more than -9% after reporting weaker-than-expected Q3 EPS, while Genuine Parts and Discover Financial Services sold off after reporting weaker-than-expected Q3 EPS. On the positive side, Netflix rose more than +16% after it reported a larger-than-expected increase in Q3 streaming paid memberships. Also, AT&T and Las Vegas Sands rallied more than +2% after reporting better-than-expected Q3 EPS.
In the Middle East, United Nations Secretary-General Guterres traveled to Egypt Thursday, and UK Prime Minister Sunak was in Israel to meet Israeli leaders before heading to a “number of other regional capitals” as global leaders attempt to keep the Israeli-Hamas war from widening. Also, drones targeted a U.S. base in Syria, and a U.S. destroyer intercepted cruise missiles and drones launched by Houthi rebels in Yemen headed toward Israel.
Comments from Fed Chair Powell suggest he might favor pausing Fed rate hikes for a second consecutive meeting when the FOMC meets Oct 31-Nov1 when he said, “Given the uncertainties and risks, and how far we have come, the FOMC is proceeding carefully. We will make decisions about the extent of additional policy firming and how long policy will remain restrictive based on the totality of the incoming data, the evolving outlook, and the balance of risks."
U.S. weekly initial unemployment claims unexpectedly fell -13,000 to an 8-3/4 month low of 198,000, showing a stronger labor market than expectations of an increase to 210,000.
The U.S. Oct Philadelphia Fed business outlook survey rose +4.5 to -9.0, weaker than expectations of -7.0.
U.S. Sep existing home sales fell -2.0% m/m to a nearly 13-year low of 3.96 million, although above expectations of 3.89 million.
U.S. Sep leading indicators fell -0.7% m/m, weaker than expectations of -0.4% m/m and the biggest decline in 4 months.
The markets are discounting a 2% chance that the FOMC will raise the funds rate by +25 bp at the next FOMC meeting that ends on November 1, and a 26% chance for that +25 bp rate hike at the following meeting that ends on December 13. The markets are then expecting the FOMC to begin cutting rates in the second half of 2024 in response to an expected slowdown in the U.S. economy.
U.S. and European bond yields Thursday moved higher. The 10-year T-note yield rose to a 16-year high of 4.992% and finished up +6.2 bp at 4.977%. The 10-year German bund yield rose to a 2-week high of 2.961% and finished up +0.6 bp at 2.931%. The 10-year UK gilt yield rose to a 1-3/4 month high of 4.722% and finished up +1.5 bp at 4.673%.
Overseas stock markets Thursday settled lower. The Euro Stoxx 50 closed down -0.38%. China’s Shanghai Composite Index closed down -1.74%. Japan’s Nikkei 225 today closed down -1.91%.
Today’s stock movers…
Genuine Parts (GPC) closed down more than -12% to lead losers in the S&P 500 after reporting Q3 net sales of $5.80 billion, weaker than the consensus of $5.94 billion.
Tesla (TSLA) closed down more than -9% to lead losers in the Nasdaq 100 after reporting Q3 EPS of 66 cents, below the consensus of 74 cents, with gross margins of 17.9%, weaker than the consensus of 18%.
Zions Bancorp (ZION) closed down more than -9% after reporting Q3 total deposits of $75.40 billion, below the consensus of $76.51 billion.
Rollins Inc (ROL) closed down more than -8% after peer Rentokil Initial reported weaker consumer demand for its pest control business in the U.S.
Discover Financial Services (DFS) closed down more than -7% after reporting Q3 EPS of $2.59, well below the consensus of $3.17.
Blackstone (BX) closed down more than -7% after reporting Q3 distributable income/share of 94 cents, weaker than the consensus of $1.01.
Lam Research (LRCX) closed down more than -5% after reporting Q1 customer support-related revenue of $1.43 billion, weaker than the consensus of $1.51 billion.
Crown Castle (CCI) closed down more than -5% after reporting Q3 net revenue of $1.67 billion, weaker than the consensus of $1.69 billion.
Netflix (NFLX) closed up more than +16% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q3 streaming paid memberships of +247.15 million, well above the consensus of +244.41 million.
AT&T (T) closed up more than +6% after reporting Q3 free cash flow of $5.2 billion, above the consensus of $4.6 billion.
Las Vegas Sands (LVS) closed up more than +2% after reporting Q3 adjusted property Ebitda of $1.12 billion, above the consensus of $1.06 billion, and its board of directors authorized a $2 billion stock buyback program.
Union Pacific (UNP) closed up more than +2% after reporting Q3 EPS of $2.51, stronger than the consensus of $2.41.
Match Group (MTCH) closed up more than +1% after Bank of America reinstated coverage of the stock with a buy recommendation and a price target of $52.
Fifth Third Bancorp (FITB) closed up more than +1% after reporting Q3 net interest income of $1.45 billion, above the consensus of $1.43 billion.
Across the markets…
December 10-year T-notes (ZNZ23) Thursday closed down -14.5 ticks, and the 10-year T-note yield rose +6.2 bp to 4.977%. Dec T-notes Thursday dropped to a new 16-year nearest-futures low, and the 10-year T-note yield climbed to a 16-year high of 4.992%. T-notes were under pressure Thursday after weekly U.S. jobless claims unexpectedly fell to an 8-3/4 month low, which signaled labor market strength that is hawkish for Fed policy. Also, an increase in inflation expectations is bearish for T-notes after Thursday's 10-year breakeven inflation rate climbed to a 7-1/2 month high of 2.504%.
T-notes recovered from their worst levels Thursday on Fed Chair Powell’s comments that suggest he might favor continuing the Fed’s rate hike pause when he said the Fed would “proceed carefully” when making decisions about the extent of additional policy firming. T-notes also garnered support after Sep leading indicators fell more than expected, and Sep existing home sales fell to a 13-year low.
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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
