Tech Stock Strength Lifts the Broader Market

The S&P 500 Index ($SPX) (SPY) today is up +0.17%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.35%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.16%.

Strength in tech stocks today is lifting the broader market. Alphabet is up more than +5% after it reported stronger-than-expected Q3 revenue late Tuesday.  Also, stronger-than-expected US economic news today bolstered the prospects for a soft landing and was supportive for stocks after Q3 personal consumption rose more than expected, and the Oct ADP employment report showed employers added the most jobs in 15 months. 

The Nasdaq 100 is under pressure today from some negative corporate news.  Super Micro Computer plunged more than -30% after accounting firm Ernst & Young LLP resigned as SMCI’s auditor amid a US Justice Department probe of the company’s accounting practices.  Also, Advanced Micro Devices is down more than -7% after forecasting Q4 revenue below consensus. 

US MBA mortgage applications fell -0.1% in the week ended October 25, with the purchase mortgage sub-index up +5.0% and the refinancing mortgage sub-index down -6.3%.  The average 30-year fixed mortgage rate rose +21 bp to a 3-month high of 6.73% from 6.52% in the prior week. 

The US Oct ADP employment change rose +233,000, showing a stronger labor market than expectations of +111,000 and the biggest increase in 15 months.

US Q3 GDP grew +2.8% (q/q annualized), slightly weaker than expectations of +2.9%.  Q3 personal consumption rose +3.7%, stronger than expectations of +3.3%, and the Q3 core PCE price index eased to +2.2% from 2.8% in Q2.

US Sep pending home sales rose +7.4% m/m, stronger than expectations of +1.9% m/m and the largest increase in 4-1/4 years.

Caution in the markets persists 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 is reporting, (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, four more of the Magnificent Seven stocks are releasing earnings this week.  Meta Platforms and Microsoft report after today’s close.  Amazon and Apple report on Thursday.

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 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 fell to a 5-week low and is down -1.15%.  China's Shanghai Composite index slid to a 1-week low and closed down -0.61%.  Japan's Nikkei Stock 225 rallied to a 2-week high and closed up +0.96%.

Interest Rates

December 10-year T-notes (ZNZ24) today are up +2 ticks.  The 10-year T-note yield is down -0.4 bp at 4.250%.  T-notes today are mildly higher on some short covering after the Treasury announced $125 billion of debt sales for its November quarterly refunding next week, right on consensus and unchanged from last quarter.  In addition, today’s weaker-than-expected US Q2 GDP report supported T-notes.  T-notes fell back from their best levels after European government bonds gave up an early rally and turned lower.

Today’s US Oct ADP employment change report rose by the most in 15 months, a sign of strength in the labor market that is hawkish for Fed policy and bearish for T-notes.  Also, signs of healthy consumer spending weighed on T-notes as US Q3 personal consumption rose more than expected.  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.

European government bond yields today are moving higher.  The 10-year German bund yield rose to a 3-month high of 2.370% and is up +2.1 bp at 2.358%.  The 10-year UK gilt yield jumped to a 5-month high of 4.399% and is up +5.3 bp at 4.368%.

Eurozone Q3 GDP grew +0.4% q/q and +0.9% y/y, stronger than expectations of +0.2% q/q and +0.8% y/y.

Eurozone Oct economic confidence unexpectedly fell -0.7 to a 6-month low of 95.6, weaker than expectations of an increase to 96.3.

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

Alphabet (GOOG) is up more than +5% to lead gainers in the Nasdaq 100 after reporting Q3 revenue ex-TAC of $74.55 billion, better than the consensus of $72.88 billion, and Q3 cloud revenue of $11.35 billion, stronger than the consensus of $10.79 billion.

Garmin Ltd (GRMN) is up more than +23% to lead gainers in the S&P 500 after reporting Q3 revenue of $1.59 billion, above the consensus of $1.43 billion.

Reddit Inc (RDDT) is up more than +41% after reporting Q3 adjusted Ebitda of $94.1 million, well above the consensus of $58.9 million, and forecasting Q4 adjusted Ebitda of $110 million-$125 million, stronger than the consensus of $87 million. 

Visa (V) is up more than +3% to lead gainers in the Dow Jones Industrials after reporting Q4 net revenue of $9.62 billion, better than the consensus of $9.49 billion.

FMC Corp (FMC) is up more than +11% after reporting Q3 adjusted EPS continuing operations of 69 cents, stronger than the consensus of 53 cents. 

Dayforce (DAY) is up more than +7% after reporting Q3 revenue of $440.0 million, better than the consensus of $428.1 million, and raising its full-year revenue forecast to $1.75 billion from a previous estimate of $1.74 billion.

Bio-Techne (TECH) is up more than +7% after reporting Q1 net sales of $289.5 million, stronger than the consensus of $280.2 million. 

Snap Inc (SNAP) is up more than +14% after reporting Q3 daily active users of 443 million, above the consensus of 441.16 million. 

Super Micro Computer (SMCI) is down more than -30% to lead losers in the S&P 500 and Nasdaq 100 after accounting firm Ernst & Young LLP resigned as SMCI’s auditor amid a US Justice Department probe of the company’s accounting practices.

Qorvo (QRVO) is down more than -25% after forecasting Q3 revenue of $875 million-$925 million, well below the consensus of $1.06 billion.

Advanced Micro Devices (AMD) is down more than -9% after forecasting Q4 revenue of $7.2 billion-$7.8 billion, the midpoint below the consensus of $7.55 billion. 

Caesars Entertainment (CZR) is down more than -8% after reporting Q3 same-store net revenue of $2.87 billion, weaker than the consensus of $2.93 billion. 

Eli Lilly & Co (LLY) is down more than -5% after cutting its full-year adjusted EPS estimate to $13.02-$13.52 from a previous estimate of $16.10-$16.60.

Chipotle Mexican Grill (CMG) is down more than -6% after reporting Q3 same-store sales rose +6.0%, below the consensus of +6.4%.

Otis Worldwide (OTIS) is down more than -2% after reporting Q3 net sales of $3.55 billion, weaker than the consensus of $3.56 billion.

Caterpillar (CAT) is down more than -1% after reporting Q3 adjusted EPS of $51.7, weaker than the consensus of $5.34.   

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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