Stocks Mostly Higher on Strong Corporate Earnings Results

The S&P 500 Index ($SPX) (SPY) today is up by +0.02%, the Dow Jones Industrials Index ($DOWI) (DIA) is up by +0.48%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down by -0.26%.

Stocks today are mixed, with the Nasdaq 100 falling to a 1-week low. Better-than-expected corporate earnings results are a supportive factor for stocks.  United Airlines Holdings is up more than +8% after reporting stronger-than-expected Q3 adjusted EPS and initiating a $1.5 billion stock buyback program.  Also, bank stocks are climbing today after Morgan Stanley reported stronger-than-expected Q3 net revenue and US Bancorp reported better-than-expected Q3 net interest income.  In addition, today’s weaker-than-expected UK Sep consumer price report knocked global bond yields lower, a supportive factor for stocks.  

Chip stocks remain under pressure today from Tuesday’s rout and are weighing on the Nasdaq 100.  ASML Holding NV is down more than -5%, adding to Tuesday’s -16% plunge, after CEO Fouquet said he expects a slow chip market recovery to extend “well into 2025.” Also, Intel is down more than -3% after the Cyber Security Association of China suggested that cybersecurity checks be conducted on Intel’s products sold in China. 

US MBA mortgage applications fell -17.0% in the week ended October 11, with the purchase mortgage sub-index down -7.2% and the refinancing sub-index down -26.3%.  The 30-year fixed rate mortgage rose +16 bp to 6.52% from 6.36% the prior week.

The US Sep import price index ex-petroleum rose +0.2% m/m, stronger than expectations of +0.1% m/m.

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 +4.3% 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 95% 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 mixed.  The Euro Stoxx 50 dropped to a 3-week low and is down by -0.61%.  China's Shanghai Composite recovered from a 2-week low and closed up by +0.05%.   Japan's Nikkei Stock 225 fell to a 1-week low and closed down by -1.83%.

Interest Rates

December 10-year T-notes (ZNZ24) today are up by +5 ticks.  The 10-year T-note yield is down by -2.0 bp to 4.012%. Dec T-notes today rose to a 1-week high, and the 10-year T-note yield fell to a 1-week low of 3.999%.  T-notes are moderately higher and garnered carryover support today from a rally in European government bonds.  Also, a decline in inflation expectations is bullish for T-notes after the 10-year breakeven inflation rate fell to a 1-week low today of 2.272%.

European government bond yields today are lower.  The 10-year German bund yield dropped to a 1-1/2 week low of 2.175% and is down -4.0 bp to 2.182%.  The 10-year UK gilt yield fell to a 1-1/2 week low of 4.055% and is down -9.3 bp to 4.069%.

UK Sep CPI eased to +1.7% y/y from +2.2% y/y in Aug, better than expectations of +1.9% y/y and the smallest pace of increase in almost 3-1/2 years.  Sep core CPI eased to +3.2% y/y from +3.6% y/y in Aug, better than expectations of +3.4% y/y.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 98% for Thursday’s meeting.

US Stock Movers

United Airlines Holdings (UAL) is up more than +8% to lead gainers in the S&P 500 after reporting Q3 adjusted EPS of $3.33, stronger than the consensus of $3.07, and initiated a $1.5 billion stock buyback program.

Morgan Stanley (MS) is up more than +7% after reporting Q3 net revenue of $15.38 billion, stronger than the consensus of $14.35 billion. 

US Bancorp (USB) is up more than +4% after reporting Q3 net interest income of $4.17 billion, better than the consensus of $4.06 billion.

JB Hunt Transport Services (JBHT) is up more than +5% after reporting Q3 EPS of $1.49, better than the consensus of $1.39.

Synchrony Financial (SYF) is up more than +3% after reporting Q3 net interest income of $4.61 billion, above the consensus of $4.53 billion. 

First Horizon Corp (FHN) is up more than +3% after reporting Q3 adjusted EPS of 42 cents, better than the consensus of 38 cents. 

Universal Health Services (UHS) is up more than +5% after TD Cowen upgraded the stock to buy from hold with a price target of $283.   

Cisco Systems (CSCO) is up more than +2% after Citigroup upgraded the stock to buy from neutral with a price target of $62.

Intel (INTC) is down more than -3% to lead losers in the Dow Jones Industrials after the Cyber Security Association of China suggested that cybersecurity checks be conducted on Intel’s products sold in China. 

ASML Holding NV (ASML) is down more than -5% to lead losers in the Nasdaq 100, adding to Tuesday’s -16% plunge, after CEO Fouquet said he expects a slow chip market recovery to extend “well into 2025.” 

Ulta Beauty (ULTA) is down more than -3% to lead losers in the S&P 500 after forecasting full-year net sales of $11.0 billion-$11.2 billion, the midpoint below the consensus of $11.17 billion.

Penguin Solutions (PENG) is down more than -23% after reporting Q4 net sales of $311 million, weaker than the consensus of $325 million. 

Interactive Brokers Group (IBKR) is down more than -4% after reporting Q3 adjusted EPS of $1.75, weaker than the consensus of $1.82. 

Estee Lauder (EL) is down more than -1% after HSBC downgraded the stock to hold from buy. 

Earnings Reports (10/16/2024)

Abbott Laboratories (ABT), Citizens Financial Group Inc (CFG), Crown Castle Inc (CCI), CSX Corp (CSX), Discover Financial Services (DFS), Equifax Inc (EFX), Kinder Morgan Inc (KMI), Morgan Stanley (MS), PPG Industries Inc (PPG), Prologis Inc (PLD), Steel Dynamics Inc (STLD), Synchrony Financial (SYF), US Bancorp (USB).

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