Stocks Gain on Positive Corporate Earnings Results

What you need to know…

The S&P 500 Index ($SPX) (SPY) today is up +0.87%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.88%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.98%.

Stocks this morning are moderately higher on some positive corporate quarterly earnings results.  Verizon Communications is up more than +7%, and RTX Corp, 3M Co, and General Electric are up more than +4% after posting stronger-than-expected Q3 earnings.  The markets are looking ahead to big tech earnings that will roll in after the close today with results from Alphabet and Microsoft.

On the negative side for stocks, T-note yields erased an early decline and moved higher on stronger-than-expected news on U.S. manufacturing activity, a hawkish factor for Fed policy, after the Oct S&P manufacturing PMI unexpectedly rose +0.2 to a 6-month high of 50.0, stronger than expectations of a decline to 49.5.

In the Middle East, French President Macron called for an international coalition to fight Hamas and warned other Iranian-backed militant groups not to open new fronts in the Israeli-Hamas war as he met with Prime Minister Netanyahu today in Israel.  Western countries have intensified efforts to stop the Israeli-Has war from spreading, with EU leaders endorsing a United Nations call for a “humanitarian pause” in the war. 

Israel said it supports diplomatic efforts to get Hamas to release hostages from Gaza, a move that could delay a possible ground invasion, although Israel said it won’t wait long to start its ground assault.  Iran and its proxy forces in Lebanon, Iraq, and Yemen have warned they could retaliate against Israel if Israeli troops enter Gaza. 

Bitcoin is up more than +9% today at a 17-1/2 month high on speculation the SEC will soon approve spot Bitcoin ETFs.  On Monday, a U.S. federal appeals court also formalized a victory for Grayscale Investments LLC in its bid to create a spot Bitcoin ETF over objections from the SEC.

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 28% 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 are mixed.  The 10-year T-note yield is up +1.7 bp at 4.867%. The 10-year German bund yield fell to a 1-week low of 2.786% and is down -4.1 bp at 2.833%.  The 10-year UK gilt yield fell to a 1-week low of 4.491% and is down -4.6 bp at 4.553%.  

Overseas stock markets are higher.  The Euro Stoxx 50 is up +0.73%.  China’s Shanghai Composite Index closed up +0.78%.  Japan’s Nikkei 225 today closed up +0.20%.

Today’s stock movers…

Verizon Communications (VZ) is up more than +7% to lead gainers in the S&P 500 and Dow Jones Industrials after reporting Q3 adjusted EPS of $1.22, better than the consensus of $1.18. 

RTX Corp (RTX) is up more than +7% after reporting Q3 adjusted EPS of $1.25, above the consensus of $1.21, and announcing a $10 billion share buyback program. 

W R Berkley (WRB) is up more than +7% after reporting Q3 net premiums earned of $2.64 billion, better than the consensus of $2.44 billion. 

General Electric (GE) is up more than +5% after reporting Q3 adjusted EPS of 82 cents, well above the consensus of 56 cents, and raising its 2023 adjusted EPS estimate to $2.55-$2.65 from a previous estimate of $2.10-$2.30, stronger than the consensus of $2.36. 

Sealed Air Corp (SEE) is up more than +5% after forecasting full-year net sales of $5.40 billion-$5.60 billion, the midpoint above the consensus of $5.49. 

3M Co (MMM) is up more than +4% after raising its full-year adjusted EPS estimate to $8.95-$9.15 from a prior estimate of $8.60-$9.10. 

Fiserv Inc (FI) is up more than +4% after reporting Q3 adjusted EPS of $1.96, above the consensus of $1.93, and raising its full-year adjusted EPS forecast to $7.47-$7.52 from a prior forecast of $7.40-$7.50. 

Coca-Cola Co (KO) is up more than +2% after reporting Q3 organic revenue rose +11%, well above the consensus of +6.91%, and forecast full-year organic revenue of up +10% to +11%, stronger than the consensus of +9.88%. 

HCA Healthcare (HCA) is down more than -7 % to lead losers in the S&P 500 after reporting Q3 adjusted Ebitda of $2.88 billion, below the consensus of $2.93 billion, and cutting the top end of its full-year profit forecast to $17.80-$18.50 from a previous estimate of $17.70-$18.90.

Corning (GLW) is down more than -5% after reporting Q3 core sales of $3.46 billion, below the consensus of $3.51 billion.

FMC Corp (FMC) is down more than -4%, adding to Monday’s -13% plunge, after cutting its full-year revenue outlook to $4.48 billion-$4.72 billion from a previous estimate of $5.20 billion-$5.40 billion.  

Haliburton (HAL) is down more than -3% after reporting Q3 revenue of $5.80 billion, weaker than the consensus of $5.85 billion.

NVR Inc (NVR) is down more than -3% after reporting Q3 consolidated revenue of $2.57 billion, weaker than the consensus of $2.60 billion. 

IonQ (IONQ) is down more than -9% after announcing that cofounder and chief science officer Monroe is leaving the company. 

VMware (VMW) is down more than -2% as the company said it told investors they had until 5 pm Monday to decide whether to get paid in cash or Broadcom shares in Broadcom’s acquisition of the company. Once investors decide how they wish to be paid, they can’t sell their shares until the acquisition closes. 

Bath & Body Works (BBWI) is down more than -1% after JPMorgan Chase downgraded the stock to underweight from neutral with a price target of $27.

Across the markets…

December 10-year T-notes (ZNZ23) this morning are down -7 ticks, and the 10-year T-note yield is up +1.7 bp at 4.867%. Dec T-notes today fell back from early gains and are moderately lower after the U.S. Oct S&P manufacturing PMI unexpectedly to a 6-month high, a hawkish factor for Fed policy.  Also, supply pressures are weighing on T-notes as the Treasury later today will auction $51 billion of 2-year T-notes as part of this week’s $167 billion auction package of T-notes and floating-rate T-notes.

The dollar index (DXY00) today is up by +0.56%.  The dollar today recovered from a 1-month low and turned higher after stronger-than-expected U.S. manufacturing news pushed T-note yields higher.  Also, weakness in EUR/USD supported the dollar on dovish comments from ECB President Lagarde and weaker-than-expected Eurozone economic news.

EUR/USD (^EURUSD) today is down by -0.54%.  The euro today fell back from a 1-month high and turned lower on weaker-than-expected news on Eurozone Oct manufacturing and services activity. The euro extended its losses on comments from ECB President Lagarde, who said the Eurozone economy faces stagnation for the next few quarters.

The Eurozone Oct S&P manufacturing PMI unexpectedly fell -0.4 to 43.0, weaker than expectations of an increase to 43.7.  Also, the Oct S&P composite PMI unexpectedly fell -0.7 to 46.5, weaker than expectations of an increase to 47.4 and the steepest pace of contraction in almost three years.

German Nov GfK consumer confidence fell -1.4 to a 7-month low of -28.1, weaker than expectations of -27.0.

Bloomberg reported that ECB President Lagarde told the presidents of the European Commission, the European Council, and the Eurogroup that the Eurozone economy faces stagnation for the next few quarters and downside dangers, though risks to prices have become more balanced. 

USD/JPY (^USDJPY) today is up by +0.09%.  The yen today gave up an early advance and turned lower as T-note yields rose on better-than-expected U.S. manufacturing news.  The yen also came under pressure as Japanese government bond yields declined after the BOJ announced an unexpected bond-buying operation.

The Japan Oct Jibun Bank manufacturing PMI was unchanged at 48.5.  The Oct Jibun Bank services PMI fell -2.7 to 51.1, the slowest pace of expansion in 10 months.

The BOJ today announced an unexpected bond-buying operation and will buy 300 billion yen ($2 billion) of 5-to-10 year Japanese government bonds and 100 billion yen of 10-to-25 year securities.

December gold (GCZ3) today is down -1.5 (-0.58%), and Dec silver (SIZ23) is down -0.105 (-0.45%).  Precious metals prices this morning are moderately lower.  A stronger dollar today is weighing on precious metals prices. Also, stronger-than-expected U.S. manufacturing news today was hawkish for Fed policy and pushed T-note yields higher, undercutting precious metals.  In addition, geopolitical risks in the Middle East eased slightly and curbed safe-haven demand for precious metals as Israel was delaying a ground invasion of Gaza to obtain the release of more hostages. 

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