Stocks Supported by Speculation Trump’s Policies to Boost Corporate Profits

The S&P 500 Index ($SPX) (SPY) today is up +0.65%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.07%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.22%.

Stocks today are moderately higher, with the S&P 500, the Dow Jones Industrials, and the Nasdaq 100 posting new all-time highs. Stocks today added to their post-election gains on speculation President-elect Trump will boost corporate profits through his pro-growth policies.  The strength of chip stocks is also boosting the overall market, led by a +5% jump in ARM Holdings Plc after it reported Q2 earnings and revenue above consensus.  Today’s US economic news was mixed.  Weekly jobless claims rose less than expected, but Q1 nonfarm productivity rose less than expected, and Q1 unit labor costs rose more than expected.

US weekly initial unemployment claims rose +3,000 to 221,000, showing a stronger labor market than expectations of 222,000.

US Q3 nonfarm productivity rose +2.2%, weaker than expectations of +2.5%.  Q1 unit labor costs rose +1.9%, stronger than the expectations of +1.0%.

Global equity markets have carryover support from today’s +2% jump in China’s Shanghai Composite stock index to a 4-week high on signs of strength in China’s economy that is positive for global growth prospects.  Today’s news showed China Oct exports rose +12.7% y/y, stronger than expectations of +5.0% y/y and the biggest increase in 2-1/4 years.  However, China's imports fell -2.3% y/y, weaker than expectations of -2.0% y/y.

The markets are focused on (1) the results of the FOMC meeting today (-25 bp rate cut expected) and post-meeting comments from Fed Chair Powell, and (2) Q3 corporate earnings results with nearly 20% of the S&P 500 companies scheduled to report this week.

Of the companies in the S&P 500 that have released Q3 earnings so far, 78% 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 100% for a -25 bp rate cut at today's 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 +1.13%.  China's Shanghai Composite Index climbed to a 4-week high and closed up +2.57%. Japan's Nikkei Stock 225 fell back from a 3-week high and closed down -0.25%.

Interest Rates

December 10-year T-notes (ZNZ24) today are up +16 ticks.  The 10-year T-note yield is down -7.1 bp to 4.361%.  Dec T-notes are moderately higher on expectations for the FOMC later today to cut the fed funds target range by -25 bp. T-notes are also climbing on some short covering from bond dealers covering short hedges they placed on T-notes during this week’s quarterly refunding, where the Treasury auctioned $125 billion of T-notes and T-bonds. 

Gains in T-notes are limited after weekly US jobless claims rose less than expected, which is a sign of labor market strength that is hawkish for Fed policy.  Also, Q1 nonfarm productivity rose less than expected and Q1 unit labor costs rose more than expected, bearish factors for T-notes.  In addition, today’s rally in the S&P 500 to a new record high has curbed some safe-haven demand for T-notes.

European government bond yields today are mixed.  The 10-year German bund yield climbed to a 3-1/2 month high of 2.498% and is up +1.3 bp to 2.417%.  The 10-year UK gilt yield is down -7.5 bp to 4.487%.

Eurozone Sep retail sales rose +0.5% m/m, stronger than expectations of +0.4% m/m, and Aug was revised upward to +1.1% m/m from the previously reported +0.2% m/m.

German trade data was better than expected as Sep exports fell -1.7% m/m, stronger than expectations of -2.4% m/m.  Also, Sep imports rose +2.1% m/m, stronger than expectations of +0.6% m/m. 

German Sep industrial production fell -2.5% m/m, weaker than expectations of -1.0% m/m.

As expected, the Bank of England (BOE) cut its benchmark interest rate by -25 bp to 4.75% from 5.00%.  BOE Governor Bailey said we can't cut rates "too quickly or by too much" and that interest rates are likely to fall "gradually from here."

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 17% for a -50 bp rate cut at the same meeting.

US Stock Movers

ARM Holdings Plc (ARM) is up more than +6% to lead chip stocks higher after reporting Q2 revenue of $844 million, stronger than the consensus of $810.9 million.  Also, Intel (INTC) is up more than +3% to lead gainers in the Dow Joines Industrials.  In addition, Applied Materials (AMAT), Advanced Micro Devices (AMD), Marvell Technology (MRVL), and Broadcom (AVGO) are up more than +2%.  Finally, Nvidia (NVDA),  KLA Corp (KLAC), and Lam Research (LRCX) are up more than +1%.

EPAM Systems (EPAM) is up more than +14% after reporting Q3 revenue of $1.17 billion, better than the consensus of $1.15 billion, and forecasting Q4 revenue of $1.21 billion-$1.22 billion, well above the consensus of $1.15 billion. 

Warner Bros Discovery (WBD) is up more than +15% to lead gainers in the S&P 500  and the Nasdaq 100 after reporting Q3 total subscribers of 110.5 million, well above the consensus of 109.01 million. 

Vistra Corp (VST) is up more than +10% after it boosted its full-year ongoing operations adjusted Ebitda forecast to $5.00 billion-$5.20 billion from a prior forecast of $4.55 billion-$5.05 billion. 

McKesson (MCK) is up more than +10% after reporting Q2 adjusted EPS of $7.07, better than the consensus of $6.88, and raising its 2025 adjusted EPS forecast to $32.40-$33.00 from a previous forecast of $31.75-$32.55, stronger than the consensus of $32.00. 

Take-Two Interactive Software (TTWO) is up more than +5% after reporting Q2 net bookings of $1.47 billion, above the consensus of $1.44 billion. 

Ralph Lauren (RL) is up more than +5% after raising its 2025 revenue growth estimate to +3% to +4% from a previous estimate of +2% to +3%, above the consensus of +2.92%. 

Lyft (LYFT) is up more than +27% after reporting Q3 gross bookings of $4.11 billion, stronger than the consensus of $4.08 billion, and forecasting Q4 gross bookings of $4.28 billion-$4.35 billion, well above the consensus of $4.23 billion.

Match Group (MTCH) is down more than -17% to lead losers in the S&P 500 after reporting Q3 revenue of $895.5 million, below the consensus of $900.9 million, and forecasting Q4 revenue of $865 million-$875 million, weaker than the consensus of $905.9 million. 

MercadoLibre (MELI) is down more than -14% to lead losers in the Nasdaq 100 after reporting Q3 adjusted Ebitda of $714.0 million, well below the consensus of $927.7 million.

Corteva (CTVA) is down more than -6% after cutting its full-year net sales forecast to $17.0 billion-$17.2 billion from a previous forecast of $17.2 billion-$17.5 billion, weaker than the consensus of $17.21 billion. 

Rockwell Automation (ROK) is down more than -4% after forecasting 2025 adjusted EPS of $8.60-$9.80, well below the consensus of $10.57. 

JPMorgan Chase (JPM) is down more than -3% to lead losers in the Dow Jones Industrials after Baird downgraded the stock to underperform from neutral with a price target of $200.

KeyCorp (KEY) is down more than -3% after Citigroup downgraded the stock to neutral from buy with a price target of $19.

Earnings Reports (11/7/2024)

Air Products and Chemicals Inc (APD), Airbnb Inc (ABNB), Akamai Technologies Inc (AKAM), Arista Networks Inc (ANET), Axon Enterprise Inc (AXON), Becton Dickinson & Co (BDX), Consolidated Edison Inc (ED), Corpay Inc (CPAY), Duke Energy Corp (DUK), EOG Resources Inc (EOG), EPAM Systems Inc (EPAM), Evergy Inc (EVRG), Expedia Group Inc (EXPE), Fortinet Inc (FTNT), Halliburton Co (HAL), Hershey Co/The (HSY), Insulet Corp (PODD), Kenvue Inc (KVUE), Mettler-Toledo International Inc (MTD), Moderna Inc (MRNA), Molson Coors Beverage Co (TAP), Monster Beverage Corp (MNST), Motorola Solutions Inc (MSI), News Corp (NWSA), PG&E Corp (PCG), Ralph Lauren Corp (RL), Rockwell Automation Inc (ROK), Solventum Corp (SOLV), Tapestry Inc (TPR), TransDigm Group Inc (TDG), Viatris Inc (VTRS), Vistra Corp (VST), Warner Bros Discovery Inc (WBD).

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