Stocks Close Moderately Higher on Strong Corporate Earnings Results

What you need to know…

The S&P 500 Index ($SPX) (SPY) on Tuesday closed up +0.73%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.62%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.97%.

Stocks on Tuesday rose moderately, buoyed by some better-than-expected corporate earnings results.  Verizon Communications closed up more than +9%, and RTX Corp, 3M, and GE all rose more than +4% after posting stronger-than-expected quarterly earnings. The markets are looking ahead to big tech earnings that will roll in after Tuesday’s close with results from Alphabet and Microsoft.

On the negative side for stocks, Tuesday’s U.S. manufacturing activity was stronger-than-expected, which was a hawkish factor for Fed policy.  The Oct S&P U.S. 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 Tuesday 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 in Israel.  Western countries have intensified efforts to stop the Israeli-Hamas 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 rose more than +7% Tuesday to a 17-1/2 month high on speculation the SEC will soon approve spot Bitcoin ETFs.  Late Monday, a U.S. federal appeals court formalized a victory for Grayscale Investments LLC in its bid to create a spot Bitcoin ETF over the SEC’s objections.

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 Tuesday moved lower.  The 10-year T-note yield fell -1.9 bp to 4.831%. The 10-year German bund yield fell to a 1-week low of 2.786% and finished down -4.6 bp at 2.828%.  The 10-year UK gilt yield fell to a 1-week low of 4.491% and finished down -5.9 bp at 4.539%. 

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. 

The Oct S&P Eurozone manufacturing PMI unexpectedly fell -0.4 to 43.0, weaker than expectations of an increase to 43.7.  Also, the Oct S&P Eurozone composite PMI unexpectedly fell -0.7 to 46.5, weaker than expectations of an increase to a 3-year low of 47.4.

Overseas stock markets Tuesday settled higher.  The Euro Stoxx 50 closed up +0.58%.  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) closed up more than +9% 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) closed 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) closed up more than +6% after reporting Q3 net premiums earned of $2.64 billion, better than the consensus of $2.44 billion. 

General Electric (GE) closed up more than +6% 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) closed up more than +6% after forecasting full-year net sales of $5.40 billion-$5.60 billion, the midpoint above the consensus of $5.49. 

3M Co (MMM) closed up more than +5% after raising its full-year adjusted EPS estimate to $8.95-$9.15 from a prior estimate of $8.60-$9.10. 

Paccar Inc (PCAR) closed up more than +4% to lead gainers in the Nasdaq 100 after reporting Q3 adjusted EPS of 2.34, stronger than the consensus of $2.13.

Fiserv Inc (FI) closed 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) closed up more than +3% 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%. 

Transunion (TRU) closed down more than -23% after reporting Q3 revenue of $969 million, weaker than the consensus of $981.4 million, and cutting its full-year revenue estimate to $3.79 billion-$3.81 billion from a prior view of $3.82 billion-$3.89 billion. Also on the news, peers Fair Isaac (FICO) closed down more than -7% to lead losers in the S&P 500, and Equifax (EFX) closed down more than -5%.

Pentair Plc (PNR) closed down more than -5% after forecasting Q4 adjusted EPS of 82 cents-87 cents, weaker than the consensus of 92 cents. 

HCA Healthcare (HCA) closed down more than -4% 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.

Archer-Daniles Midland (ADM) closed down more than -4% after reporting Q3 revenue of $21.70 billion, weaker than the consensus of $23.74 billion.

Danaher (DHR) closed down more than -3% after it said it expects Q4 non-GAAP base business core revenue from continuing operations to be down mid-single digits year-over-year.

FMC Corp (FMC) closed down more than -3%, 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) closed down more than -3% after reporting Q3 revenue of $5.80 billion, weaker than the consensus of $5.85 billion.

NVR Inc (NVR) closed down more than -2% after reporting Q3 consolidated revenue of $2.57 billion, weaker than the consensus of $2.60 billion. 

Bath & Body Works (BBWI) closed down more than -2% 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) Tuesday closed down -4 ticks, and the 10-year T-note yield fell -1.9 bp to 4.831%.   Dec T-notes Tuesday fell back from early gains and posted moderate losses after the U.S. Oct S&P manufacturing PMI unexpectedly to a 6-month high, a hawkish factor for Fed policy.  Also, slack demand for the Treasury’s $51 billion auction of 2-year T-notes undercut prices as the auction had a bid-to-cover ratio of 2.64, weaker than the 10-auction average of 2.76. 

T-notes Tuesday initially moved higher on carryover support from a rally in 10-year German bunds to a 1-week high on the weaker-than-expected Eurozone PMI reports and dovish comments from ECB President Lagarde, who said the Eurozone economy faces stagnation for the next few quarters.

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