December S&P 500 E-Mini futures (ESZ24) are down -0.46%, and December Nasdaq 100 E-Mini futures (NQZ24) are down -0.62% this morning as Treasury yields extended their rise amid speculation on the trajectory of U.S. interest rates, while investors geared up for the next round of corporate earnings.
In yesterday’s trading session, Wall Street’s major indexes closed mixed. Cigna Group (CI) slumped over -4% after Bloomberg reported that the company was reviving efforts to merge with its smaller rival Humana. Also, homebuilder stocks lost ground after the benchmark 10-year Treasury yield rose to a 2-1/2 month high, with Builders FirstSource (BLDR) sliding more than -5% to lead losers in the S&P 500 and DR Horton (DHI) falling over -4%. In addition, United Parcel Service (UPS) dropped more than -3% after Barclays downgraded the stock to Underweight from Equal Weight with a price target of $120. On the bullish side, Kenvue (KVUE) advanced more than +5% and was the top percentage gainer on the S&P 500 after the Wall Street Journal reported that activist investor Starboard Value had taken a sizeable stake in the company. Also, Boeing (BA) rose over +3% and was the top percentage gainer on the Dow after the company and the leaders of its striking machinists union reached a new tentative agreement that could end a strike lasting over a month.
Economic data released on Monday showed that the Conference Board’s leading economic index for the U.S. fell -0.5% m/m in September, weaker than expectations of -0.3% m/m.
Dallas Fed President Lorie Logan reiterated her stance on Monday that the U.S. central bank should lower interest rates at a careful pace given the uncertain economic environment. “If the economy evolves as I currently expect, a strategy of gradually lowering the policy rate toward a more normal or neutral level can help manage the risks and achieve our goals,” Logan said. Also, Minneapolis Fed President Neel Kashkari reiterated that he supports reducing interest rates at a gradual pace in the coming quarters, though a sharp weakening of the labor market could prompt him to push for faster rate cuts. In addition, Kansas City Fed President Jeffrey Schmid stated he supports a slower pace of interest rate cuts due to uncertainty about the ultimate level to which the Fed should reduce rates.
Meanwhile, U.S. rate futures have priced in an 88.9% probability of a 25 basis point rate cut and an 11.1% chance of no rate change at the next FOMC meeting in November.
Third-quarter earnings season is gathering pace, with investors awaiting fresh reports from notable companies today, including General Electric (GE), Philip Morris (PM), Verizon (VZ), Texas Instruments (TXN), Lockheed Martin (LMT), General Motors (GM), and 3M (MMM). According to Bloomberg Intelligence, companies in the S&P 500 are expected to post an average +4.3% increase in quarterly earnings for Q3 compared to the previous year, down from +7.9% growth projected in mid-July.
On the economic data front, investors will likely focus on the U.S. Richmond Manufacturing Index, which is set to be released in a couple of hours. Economists estimate this figure to come in at -19 in October, compared to the previous value of -21.
Market participants will also be anticipating a speech from Philadelphia Fed President Patrick Harker.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.212%, up +0.60%.
The Euro Stoxx 50 futures are up +0.10% this morning as investors digested a series of upbeat corporate earnings reports. However, surging global bond yields, along with uncertainties surrounding the U.S. election and rising tensions in the Middle East, kept gains limited. Technology stocks outperformed on Tuesday, while utility and chemical stocks lost ground. Meanwhile, market participants await the latest comments from European Central Bank President Christine Lagarde and the release of the IMF’s October 2024 World Economic Outlook report. In corporate news, SAP Se (SAP.D.DX) climbed over +4% after the German software company reported solid Q3 earnings and boosted its full-year targets. Also, Saab Ab (SAABB.S.DX) gained more than +5% after the Swedish aerospace and defense company posted an increase in Q3 operating earnings and confirmed its full-year outlook. In addition, DNB Bank ASA (DNB.O.DX) rose over +5% after Norway’s largest bank reported stronger-than-expected Q3 profit.
The European economic data slate is empty on Tuesday.
Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.54%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -1.39%.
China’s Shanghai Composite Index closed higher today, marking its third consecutive session of gains as investors continued to evaluate the impact of the country’s stimulus measures. Solar and home-appliance stocks gained ground on Tuesday. China lowered its one-year and five-year loan prime rates on Monday by 25 basis points to 3.10% and 3.60%, respectively, as part of a broader stimulus package aimed at reviving the economy. Also lifting market sentiment, the People’s Bank of China started its first operations under a swap facility on Monday, exchanging assets worth 50 billion yuan ($7 billion) with brokerages, fund companies, and insurers. Meanwhile, Central Huijin Investment Ltd., a unit of China’s sovereign wealth fund known for purchasing equities to stabilize the stock market, issued bonds that brought its total local debt sales this year to a record level. In corporate news, ZTE slumped over -5% after the telecom equipment maker reported weaker-than-expected Q3 earnings. Investors are awaiting Beijing’s implementation of fiscal stimulus measures to complement its monetary easing efforts. The focus will be on the National People’s Congress, whose standing committee is anticipated to meet in the coming weeks to approve government leverage and bond issuance increases.
Japan’s Nikkei 225 Stock Index closed lower today, hitting its lowest level in over two weeks, following a weak finish on Wall Street overnight. Real estate, financial, and technology stocks led the declines on Tuesday. Investors also grew cautious amid political uncertainty ahead of the country’s general election this weekend while anticipating a raft of corporate earnings reports. Support for Prime Minister Shigeru Ishiba’s ruling coalition is further waning, suggesting that the vote may lead to a weakened and unstable administration. However, SMBC Nikko Securities economists stated in a research note that Japan is expected to continue with expansionary fiscal policy and accommodative monetary conditions, regardless of the general election outcome. Meanwhile, market participants are closely watching yen movements as the recent breach of the 150 per dollar level prompted new verbal interventions from Japanese authorities. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +3.73% to 27.22.
Pre-Market U.S. Stock Movers
Medpace Holdings (MEDP) tumbled over -12% in pre-market trading after the company reported weaker-than-expected Q3 revenue and cut its full-year revenue guidance.
DMC Global (BOOM) plunged more than -17% in pre-market trading after cutting its Q3 revenue guidance.
Deckers Outdoor (DECK) fell over -2% in pre-market trading after BTIG downgraded the stock to Neutral from Buy.
iRhythm Technologies (IRTC) surged about +18% in pre-market trading after announcing that the U.S. Food and Drug Administration granted clearance for its 510(k) submission related to prior design changes made to the Zio AT device.
Zions Bancorporation (ZION) rose more than +3% in pre-market trading after reporting better-than-expected Q3 EPS.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Tuesday - October 22nd
General Electric (GE), Danaher (DHR), Philip Morris (PM), Verizon (VZ), Texas Instruments (TXN), Rtx Corp (RTX), Lockheed Martin (LMT), Fiserv (FI), Sherwin-Williams (SHW), Moody’s (MCO), 3M (MMM), Canadian National Railway (CNI), Freeport-McMoran (FCX), General Motors (GM), Kimberly-Clark (KMB), Baker Hughes (BKR), CoStar (CSGP), PulteGroup (PHM), Seagate (STX), Genuine Parts (GPC), Packaging America (PKG), Manhattan Associates (MANH), Quest Diagnostics (DGX), Pentair (PNR), Logitech (LOGI), East West Bancorp (EWBC), Enphase (ENPH), IPG (IPG), Invesco (IVZ), Agree Realty (ADC), Range Resources (RRC), Robert Half (RHI), Matador (MTDR), Valmont Industries (VMI), Old National Bancorp (ONB), PennyMac Financial (PFSI), Herc Holdings (HRI), GATX (GATX), Polaris Industries (PII), Highwoods Properties (HIW), Community Bank System (CBU), John Bean Tech (JBT), Stride (LRN), BankUnited (BKU), Banc of California (BANC), Enova International Inc (ENVA), Trustmark (TRMK), Retail Opportunity (ROIC), Vicor (VICR), National Bank Holdings (NBHC), Veritex Holdings Inc (VBTX), First Busey (BUSE), PennyMac Mortgage (PMT), Dime Community (DCOM), Brandywine (BDN), Peoples Bancorp (PEBO).
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On the date of publication, Oleksandr Pylypenko 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.
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