S&P 500 Posts a Record High on Corporate Earnings Optimism

The S&P 500 Index ($SPX) (SPY) today is up by +0.60%, the Dow Jones Industrials Index ($DOWI) (DIA) is down by -0.15%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up by +1.00%.

Stocks today are mostly higher, with the S&P 500 climbing to a new all-time high and the Nasdaq 100 posting a 2-3/4 month high.  Optimism in Q3 corporate earnings is boosting stock prices today after bank stocks rallied last Friday on earnings results from JPMorgan Chase and Wells Fargo.  Also, the strength in chip stocks is lifting the overall market.  Weakness in Boeing and Caterpillar are weighing on the Dow Jones Industrials.  Trading volumes are below average today, with trading in the cash Treasury market closed for the Columbus Day holiday, although stock trading remains open. 

Trade news from China was weaker than expected, a negative factor for global growth prospects.  China Sep exports rose +2.4% y/y, weaker than expectations of +6.0% y/y.  Also, Sep imports rose +0.3% y/y, weaker than expectations of +0.8% y/y.

China Sep CPI rose +0.4% y/y, weaker than expectations of +0.6% y/y.  China Sep PPI fell -2.8% y/y, weaker than expectations of -2.6% y/y, and the 24th consecutive month producer prices have declined.

Middle East tensions continue to be a negative factor for stocks.  In addition to Gaza, Israel is waging a ground and air offensive in Lebanon to combat Hezbollah.  The Israel Defense Force (IDF) deployed a fourth division of troops in southern Lebanon while maintaining airstrikes in Beirut’s southern suburbs.  The markets are also awaiting Israel’s response to the October 1 missile barrage from Iran.

The results of corporate Q3 earnings may determine the near-term direction of stocks.  According to Bloomberg Intelligence, companies in the S&P 500 are expected to report an average +4.2% increase in quarterly earnings in Q3 from a year ago, down from +7.9% growth projected in July.

The markets are discounting the chances at 84% for a -25 bp rate cut at the November 6-7 FOMC meeting and at 0% for a -50 bp rate cut at that meeting.

Overseas stock markets today are higher.  The Euro Stoxx 50 rallied to a 2-week high and is up by +0.33%.  China's Shanghai Composite closed up by +2.07%.   Japan's Nikkei Stock 225 was closed today for the Health Sports Day holiday.

Interest Rates

December 10-year T-notes (ZNZ24) today are down by -16 ticks.  Due to the Columbus Day holiday, there is no trading today in the cash Treasury market.  Dec T-notes today are weighed down by carryover pressure from a slide in European government bonds.  Also, today’s strength in stocks has curbed safe-haven demand for T-notes.  In addition, T-notes are sliding on negative carryover from last week’s stronger-than-expected US consumer and producer price reports for September, which dampened speculation the Fed will aggressively cut interest rates.

European government bond yields today are higher.  The 10-year German bund yield is up by +1.8 bp to 2.283%.  The 10-year UK gilt yield climbed to a 3-1/4 month high of 4.251% and is up by +4.1 bp to 4.248%.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 95% for Thursday’s meeting.

US Stock Movers

Strength in chip stocks today is boosting the overall market.  ARM Holdings Plc (ARM) is up more than +3% to lead gainers in the Nasdaq 100.  Also, Nvidia (NVDA), Applied Materials (AMAT), Lam Research (LRCX), Marvell Technology (MRVL), ASML Holding NV (ASML), and KLA Corp (KLAC) are up more than +2%.  In addition, Broadcom (AVGO) and Qualcomm (QCOM) are up more than +1%.

Cryptocurrency-linked stocks are climbing today, with the price of bitcoin (^BTCUSD) up more than +2% at a 2-week high. As a result, Coinbase Global (COIN), Marathon Digital (MARA), MicroStrategy (MSTR), and Riot Platforms (RIOT) are up more than +1%. 

Longboard Pharmaceuticals (LBPH) is up more than +51% after agreeing to be acquired by H. Lundbeck A/S for $2.6 billion. 

Vistra Corp (VST) is up more than +3% to lead gainers in the S&P 500 after BNP Paribas Exane initiated coverage of the stock with a recommendation of outperform and a price target of $231. 

SentinelOne (S) is up more than +3% after Piper Sandler upgraded the stock to overweight from neutral with a price target of $32. 

Elastic NV (ESTC) is up more than +4% after William Blair upgraded the stock to outperform from market perform.   

PG&E Corp (PCG) is up more than +1% after Jeffries initiated coverage on the stock with a buy rating and a price target of $24. 

Caterpillar (CAT) is down more than -3% to lead losers in the Dow Jones Industrials after Morgan Stanley downgraded the stock to underweight from equal weight with a price target of $332. 

Boeing (BA) is down more than -2% after announcing it plans to cut its global workforce by about 10% and announced $5 billion in charges across its commercial airplanes and defense businesses.   

AutoZone (AZO) is down more than -1% after Goldman Sachs double-downgraded the stock to sell from buy with a price target of $2.917. 

Amgen (AMGN) is down more than -1% after Truist Securities downgraded the stock to hold from buy, saying upcoming obesity data is already priced into the stock. 

VF Corp (VFC) is down more than -3% after Wells Fargo Securities downgraded the stock to underweight from equal weight with a price target of $15.

Charles River Laboratories (CRL) is down more than -1% after Redburn initiated coverage of the stock with a sell rating and a price target of $151. 

AppLovin (APP) is down more than -1% after Goldman Sachs downgraded the stock to neutral from buy.   

Earnings Reports (10/14/2024)

Hingham Institution for Savings (HIFS).

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