Stocks See Support from Positive US Consumer Confidence Report and Tech Stocks

The S&P 500 Index ($SPX) (SPY) on Tuesday closed up +0.16%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.36%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.98%.

Stocks on Tuesday saw support from the stronger-than-expected US consumer confidence report.  Higher T-note yields were a bearish factor early, but yields fell later in the day. Stocks gained ground as the day went on thanks to tech stocks, with the 0.98% rally in the Nasdaq 100 index to a new 3-3/4 month high.  Within the tech sector, the Magnificent Seven and chip stocks were leaders.

The Dow Jones Industrials index on Tuesday closed lower on negative breadth, with 23 of the 30 Dow stocks closing lower.

Stocks were undercut Tuesday by 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.  Alphabet released its earnings after Tuesday's close.  Meta and Microsoft report on Wednesday.  Amazon and Apple report on Thursday.

The Conference Board's Oct US consumer confidence index rose +9.5 points to a 9-month high of 108.7, much stronger than expectations for a small increase to 99.5.  Tuesday's +9.5 point rise was the largest in three years.  The rise in consumer confidence was due in part to the consumer view that jobs are plentiful. 

Tuesday'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, stronger than expectations of +0.20% m/m and +5.10%.

US Oct JOLTS job openings fell to a 3-3/4 year low of 7.443 million jobs, which was weaker than expectations of 8.0 million and was down from Aug's revised 7.861 million.

Tuesday'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.

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 on Tuesday closed mixed.  The Euro Stoxx 50 closed down -0.40%.  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) on Tuesday closed up 1.5 tick.  The 10-year T-note yield Tuesday posted a new 3-3/4 month high but then fell back to end the day down -2.0 bp at 4.262%. 

Dec T-note prices were undercut early Tuesday by the stronger-than-expected US consumer confidence report and by supply overhang ahead of Tuesday's auction of 7-year T-notes.  T-note prices were also 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 also saw some downward pressure as the 10-year breakeven inflation expectations rate Tuesday rose +1.4 bp to 2.308%.

However, T-note prices were able to recover later in the day after firm demand for the 7-year T-note auction resulted in a lower-than-expected auction yield.  T-notes were also supported by the weaker-than-expected JOLTS job openings report.

European government bond yields moved higher.  The 10-year German bund yield rose +5.1 bp to 2.337%. The 10-year UK gilt yield rose +6.1 bp to 4.315%.

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

US Stock Movers

The Magnificent Seven stocks helped to drive the overall stock market higher Tuesday, with gains in all of the stocks except for Tesla (TSLA), which showed a -1.45% decline.  Alphabet (GOOG) rose +1.91% ahead of its earnings release after Tuesday's close.  Meta Platforms (META) rose +2.68%,  Microsoft (MSFT) rose +1.43%, Amazon (AMZN) rose +1.35%, Nvidia (NVDA) rose +0.68%, and Apple (AAPL) rose +0.33%.

Chip stocks were big gainers on Tuesday, with Arm Holdings (ARM) up +4.77%, Broadcom (AVGO) up +4.20%, AMD (AMD) up +3.96%, Lam Research (LRCX) up +3.79%, and ON Semiconductor (ON) up +3.41%.

Oil-related stocks were weak again as oil prices Tuesday added to Monday's -6% plunge.  Chevron (CVX) fell -1.13%, Exxon (XOM) fell -1.15%, Occidental Petroleum (OXY) fell -0.87%, and Marathon Oil (MRO) fell -0.67%.

Meanwhile, airline and transportation stocks saw strength as oil prices added to Monday's -6% plunge.  Delta Air Lines (DAL) rose +3.76%, American Airlines Group (AAL) rose +1.84%, and United Airlines Holdings (UAL) rose +1.32%.  Royal Caribbean Cruises (RCL) rose +3.46%, and Carnival (CCL) rose +1.04%.

Ford (F) fell -8.25% on disappointment about the impact of high costs on profit margins.

DR Horton (DHI) fell -7.04% on disappointment about the company's 2025 revenue forecast.  The report undercut the homebuilder sector, with PulteGroup (PHM) down -3.00%, Lennar (LEN) down -2.08%, and KB Home (KBH) down -1.74%. 

Boeing (BA) rallied +1.74% on some relief after the company on Monday completed the sale of $21 billion of shares to the public to reduce debt and try to prevent a ratings downgrade to junk status.

Coinbase (COIN) rose +1.87% as bitcoin Tuesday rallied by another +4.20%, adding to Monday's gain of +4.12%.

Earnings Reports (10/30/2024)

Zimmer Biomet Holdings Inc (ZBH), Humana Inc (HUM), Caterpillar Inc (CAT), Exelon Corp (EXC), Garmin Ltd (GRMN), Dayforce Inc (DAY), Vulcan Materials Co (VMC), Trane Technologies PLC (TT), Verisk Analytics Inc (VRSK), Hess Corp (HES), Fortive Corp (FTV), Automatic Data Processing Inc (ADP), Biogen Inc (BIIB), AbbVie Inc (ABBV), GE HealthCare Technologies Inc (GEHC), Kraft Heinz Co/The (KHC), Bunge Global SA (BG), Bio-Techne Corp (TECH), Otis Worldwide Corp (OTIS), Martin Marietta Materials Inc (MLM), Global Payments Inc (GPN), NiSource Inc (NI), Eli Lilly & Co (LLY), CDW Corp/DE (CDW), Smurfit WestRock PLC (SW), TE Connectivity PLC (TEL), Illinois Tool Works Inc (ITW), Booking Holdings Inc (BKNG), Arch Capital Group Ltd (ACGL), Clorox Co/The (CLX), Allstate Corp/The (ALL), CF Industries Holdings Inc (CF), Federal Realty Investment Trust (FRT), Everest Group Ltd (EG), Meta Platforms Inc (META), American Water Works Co Inc (AWK), Mid-America Apartment Community (MAA), Prudential Financial Inc (PRU), Equinix Inc (EQIX), Ventas Inc (VTR), MetLife Inc (MET), Cognizant Technology Solutions (CTSH), UDR Inc (UDR), Public Storage (PSA), Paycom Software Inc (PAYC), Invitation Homes Inc (INVH), MGM Resorts International (MGM), Gen Digital Inc (GEN), CH Robinson Worldwide Inc (CHRW), KLA Corp (KLAC), Equity Residential (EQR), eBay Inc (EBAY), Aflac Inc (AFL), GoDaddy Inc (GDDY), Microsoft Corp (MSFT), Starbucks Corp (SBUX), Monolithic Power Systems Inc (MPWR), Amgen Inc (AMGN).

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