Stocks Pressured by Earnings and Election Uncertainty

The S&P 500 Index ($SPX) (SPY) today is down -0.10%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.20%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.10%.

Stocks today are narrowly mixed on caution ahead of a slew of key events, which include (1) this week’s peak slate of earnings reports when more than 40% of the S&P 500’s market cap will report, (2) Thursday's Sep PCE price deflator (expected to ease to +2.1% y/y nominal and +2.6% y/y core from Sep's +2.2% and +2.7%, respectively), (3) Friday's US Oct unemployment report (Oct payrolls expected +90,000 on strike and storm disruptions; Oct unemployment rate expected unchanged at 4.1%), and (4) next Tuesday's US election.

Also, five of the Magnificent Seven stocks are releasing earnings this week, with Alphabet releasing earnings after today’s close.  Meta and Microsoft then report on Wednesday.  Amazon and Apple report on Thursday.

Stocks are also being undercut today by the rise in the 10-year T-note yield to a new 3-3/4 month high.

Dec crude oil prices this morning are up +0.36%, regaining a little ground after yesterday’s -6.13% plunge on Israel’s limited weekend retaliatory strike on Iran.  Today’s mild rebound in oil prices was positive for oil-related stocks but negative for airlines, cruise lines, and other companies that use a large amount of petroleum-based fuel.

Today’s Sep US trade deficit rose to $108.2 billion, which was wider than expectations of -$96 billion and was up from Aug’s revised -$94.2 billion.  The report was negative for Q3 US GDP.

Today’s US home price reports were stronger than expected.  The FHFA house price index rose +0.3% m/m, which was stronger than expectations of +0.1%.  The S&P CoreLogic CS 20-City US home price index rose +0.35% m/m and +5.20% y/y, which was stronger than expectations of +0.20% m/m and +5.10%.

Corporate Q3 earnings season is in full gear.  Of the companies in the S&P 500 that have released earnings so far, 76% have surpassed estimates.  According to Bloomberg Intelligence, companies in the S&P 500 are expected to report an average +4.3% y/y increase in quarterly earnings in Q3, down from the +7.9% y/y growth consensus seen in July.

The markets are discounting the chances at 96% 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 is up +0.16%.  China's Shanghai Composite index closed down -1.08%.  Japan's Nikkei Stock 225 closed up +0.77%.

Interest Rates

December 10-year T-notes (ZNZ24) today are down -10.5 ticks.  The 10-year T-note yield today posted a new 3-3/4 month high and is up +4.2 bp at 4.324%.  Dec T-note prices are being undercut by supply pressures ahead of Wednesday's announcement by the Treasury of its near-term funding needs.  The T-note market also continues to be pressured by ideas that the US budget deficit will continue to be a major problem regardless of who wins next week's presidential election.  T-note prices are also seeing some downward pressure as the 10-year breakeven inflation expectations rate today is up +2.0 bp at 2.314%.

European government bond yields are trading higher.  The 10-year German bund yield is up +4.7 bp at 2.333%.  The 10-year UK gilt yield is up by +4.4 bp at 4.298%.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 40% for a -50 bp rate cut at the same meeting.

US Stock Movers

Alphabet (GOOG) is up +0.9% ahead of its earnings release after today’s close.  The other Mag 7 stocks are mostly higher, with Microsoft (MSFT) up +0.3%, Meta Platforms (META) up +0.3%, and Apple (AAPL) up +0.2%.  However, Tesla (TSLA) is little changed and Nvidia (NVDA) is down -0.4%.

Oil-related stocks remain weak today even though oil prices rose +0.4% after yesterday’s -6% plunge.  Chevron (CVX) is down -0.8%, Exxon (XOM) is down -0.7%, Occidental Petroleum (OXY) is down -0.5%, and Marathon Oil (MRO) is down -0.5%.

Meanwhile, airline and transportation stocks are mixed after their rally on Monday due to the plunge in oil prices.  Delta Air Lines (DAL) is up +0.7% and American Airlines Group (AAL) is up +0.1%, but United Airlines Holdings (UAL) is down -0.2%.  Royal Caribbean Cruises (RCL) is up +1.4% but Carnival (CCL) is down -0.3%.

Ford (F) is down more than -9%  on disappointment about the impact of high costs on profit margins.

DR Horton (DHI) is down -12% on disappointment about the company’s 2025 revenue forecast. The report undercut the homebuilder sector with PulteGroup (PHM), Lennar (LEN), and KB Home (KBH) all down about -5%.

Pfizer (PFE) is down -0.8% even though the pharma company raised its revenue and earnings guidance for 2025.

Boeing (BA) today is up +0.9% after selling $21 billion of shares to the public on Monday to reduce debt and try to prevent a ratings downgrade to junk status.

Coinbase (COIN) is up +3% as bitcoin today rallied by another +3%, adding to yesterday’s gain of +4.12%.

Earnings Reports (10/29/2024)

Pfizer Inc (PFE), Ecolab Inc (ECL), Masco Corp (MAS), DR Horton Inc (DHI), Leidos Holdings Inc (LDOS), MSCI Inc (MSCI), American Tower Corp (AMT), Sysco Corp (SYY), Royal Caribbean Cruises Ltd (RCL), PayPal Holdings Inc (PYPL), Phillips 66 (PSX), Stanley Black & Decker Inc (SWK), Zebra Technologies Corp (ZBRA), McDonald's Corp (MCD), Incyte Corp (INCY), Hubbell Inc (HUBB), Corning Inc (GLW), Qorvo Inc (QRVO), Stryker Corp (SYK), Mondelez International Inc (MDLZ), Chipotle Mexican Grill Inc (CMG), Republic Services Inc (RSG), FMC Corp (FMC), BXP Inc (BXP), Edison International (EIX), Electronic Arts Inc (EA), DaVita Inc (DVA), Extra Space Storage Inc (EXR), Chubb Ltd (CB), ONEOK Inc (OKE), IDEX Corp (IEX), Visa Inc (V), EQT Corp (EQT), First Solar Inc (FSLR), Caesars Entertainment Inc (CZR), Essex Property Trust Inc (ESS), FirstEnergy Corp (FE), Alphabet Inc (GOOGL), Advanced Micro Devices Inc (AMD).

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