Stocks Settle Mostly Higher on Positive Corporate Earnings

The S&P 500 Index ($SPX) (SPY) Thursday closed up by +0.21%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down by -0.33%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up by +0.83%.

Stocks on Thursday settled mostly higher on positive earnings results and a decline in T-note yields.  Tesla closed up more than +21% after posting its biggest quarterly profit in a year. Also, United Parcel Service closed up more than +5% after reporting better-than-expected Q3 adjusted EPS.  In addition, Lam Research closed up more than +5% to lead chip stocks higher after reporting better-than-expected Q1 revenue and forecasting Q2 revenue above consensus.  The 10-year T-note yield Thursday fell -4.8 bp to 4.198%.

Weighing on the Dow Jones Industrials Thursday was a -6% fall in International Business Machines after reporting Q3 revenue below consensus.  Also, Honeywell International closed down more than -5% after reporting weaker-than-expected Q3 sales and cutting its full-year sales forecast.

Better-than-expected US economic news on Thursday bolstered the outlook for soft landing and supported stocks. Weekly jobless claims unexpectedly declined, a sign of strength in the labor market, and the Oct S&P manufacturing PMI rose more than expected, while Sep new home sales posted a 16-month high.  Conversely, the Sep Chicago Fed national activity index unexpectedly fell to a 5-month low.

US weekly initial unemployment claims unexpectedly fell -15,000 to 227,000, showing a stronger labor market than expectations of an increase to 242,000.

The US Sep Chicago Fed national activity index unexpectedly fell -0.27 to a 5-month low of -0.28 versus expectations of an increase to 0.50.

The US Oct S&P manufacturing PMI rose +0.5 to 47.8, stronger than expectations of 47.5.

US Sep new home sales rose +4.1% m/m to a 16-month high of 738,000, stronger than expectations of 720,000.

Corporate Q3 earnings are impacting US stocks.  More than 100 companies in the S&P 500 have released earnings so far, with 76% announcing earnings that surpassed estimates.  Roughly 20% of S&P 500 companies are due to report earnings this week.  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 the +7.9% growth consensus seen in July.

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 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 Thursday settled mixed.  The Euro Stoxx 50 closed up by +0.26%.  China's Shanghai Composite closed down by -0.68%.   Japan's Nikkei Stock 225 recovered from a 3-week low and closed up by +0.10%.

Interest Rates

December 10-year T-notes (ZNZ24) Thursday closed up by +8 ticks.  The 10-year T-note yield fell by -4.8 bp to 4.198%. Dec T-notes pushed higher Thursday on some short-covering sparked by Wednesday afternoon’s Fed Beige Book that indicated economic activity was flat in most parts of the US since early September. T-notes fell back from their best levels Thursday on better-than-expected US economic news that showed weekly initial unemployment claims unexpectedly declined and Sep new home sales rose to a 16-month high.

European government bond yields on Thursday were mixed.  The 10-year German bund yield fell by -3.8 bp to 2.266%.  The 10-year UK gilt yield climbed to a 3-1/2 month high of 4.269% and finished up +3.7 bp to 4.237%.

The Eurozone Oct S&P manufacturing PMI rose +0.9 to a 5-month high of 45.9, stronger than expectations of 45.1.

The Eurozone Oct S&P composite PMI rose +0.1 to 49.7, right on expectations.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 100% for the December 12 policy meeting and a 41% chance of a -50 bp rate cut at the same meeting.

US Stock Movers

Tesla (TSLA) closed up more than +21% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q3 adjusted EPS of 72 cents, stronger than the consensus of 60 cents and raised its full-year capex estimate to above $11.0 billion from a prior forecast of above $10.0 billion.

United Parcel Service (UPS) closed up more than +5% after reporting Q3 adjusted EPS of $1.76, above the consensus of $1.63.

Molina Healthcare (MOH) closed up more than +17% after reporting Q3 revenue of $10.34 billion, better than the consensus of $9.93 billion. 

West Pharmaceutical Services (WST) closed up more than +15% after reporting Q3 net sales of $746.9 million, stronger than the consensus of $709.7 million, and raising its full-year net sales forecast to $2.88 billion-$2.91 billion from a previous forecast of $2.87 billion-$2.90 billion, above the consensus of $2.87 billion. 

CBRE Group (CBRE) closed up more than +8% after reporting Q3 revenue of $9.04 billion, stronger than the consensus of $8.78 billion. 

Raymond James Financial (RJF) closed up more than +7% after reporting Q4 adjusted EPS of $2.95, well above the consensus of $2.43.

Lam Research (LRCX) closed up more than +5% to lead chip stocks higher after reporting Q1 revenue of $4.17 billion, better than the consensus of $4.06 billion, and forecasting Q2 revenue of $4.0 billion-$4.6 billion, the midpoint above the consensus of $4.22 billion.  Also, ON Semiconductor (ON) and Texas Instruments (TXN) closed up more than +2%.  In addition, GlobalFoundries (GFS), Micron Technology (MU), and NXP Semiconductors NV (NXPI) closed up more than +1%.  Finally, Intel (INTC) closed up more than +1% to lead gainers in the Dow Jones Industrials.

T-Mobile US (TMUS) closed up more than +5% after reporting Q3 EPS of $2.61, better than the consensus of $2.43, and forecast full-year postpaid net customers of 5.6 million-5.8 million, above the consensus of 5.56 million. 

Newmont (NEM) closed down more than -14% to lead losers in the S&P 500 after reporting Q3 sales of $4.61 billion, weaker than the consensus of $4.69 billion. 

Teradyne (TER) closed down more than -11% after forecasting Q4 revenue of $710 million-$760 million, the midpoint below the consensus of $735.7 million.

International Business Machines (IBM) closed down more than -6% to lead losers in the Dow Jones industrials after reporting Q3 revenue of $14.97 billion, below the consensus of $15.05 billion.

Carrier Global (CARR) closed down more than -8% after reporting Q3 sales of $5.98 billion, well below the consensus of $6.56 billion, and lowered its full-year sales forecast to about $22.5 billion from a previous estimate of $25.5 billion, weaker than the consensus of $25.45 billion. 

Honeywell International (HON) closed down more than -5% to lead losers in the Nasdaq 100 after reporting Q3 sales of $9.73 billion, weaker than the consensus of $9.88 billion, and cut its full-year sales forecast to $38.6 billion-$38.8 billion from a prior forecast of $39.1 billion-$39.7 billion.

Hasbro (HAS) closed down more than -6% after cutting its full-year consumer product revenue estimate to down -12% to -14% from a prior view of -2% to -11%. 

Textron (TXT) closed down more than -6% after reporting Q3 adjusted EPS of $1.40, weaker than the consensus of $1.51.   

Keurig Dr Pepper (KDP) closed down more than -4% after reporting Q3 net sales of $3.89 billion, below the consensus of $3.92 billion.

Earnings Reports (10/25/2024)

Aon PLC (AON), AutoNation Inc (AN), Avantor Inc (AVTR), Booz Allen Hamilton Holding Co (BAH), Carter's Inc (CRI), Centene Corp (CNC), Colgate-Palmolive Co (CL), First Hawaiian Inc (FHB), Gentex Corp (GNTX), HCA Healthcare Inc (HCA), Medical Properties Trust Inc (MPW), Newell Brands Inc (NWL), Saia Inc (SAIA), Sun Communities Inc (SUI), TFS Financial Corp (TFSL).

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