Stocks Finish Higher on Strong Corporate Earnings

The S&P 500 Index ($SPX) (SPY) Thursday closed up +0.53%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.92%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.22%.  March E-mini S&P futures (ESH25) are up +0.48%, and March E-mini Nasdaq futures (NQH25) are up +0.09%. 

Stocks on Thursday mainly settled higher, with the S&P 500 posting a new all-time high and the Dow Jones Industrials posting a 6-week high.  Favorable corporate earnings results were supportive of the overall market on Thursday. General Electric closed up more than +6% after reporting better-than-expected Q4 adjusted EPS and announcing plans to buy back $7 billion of stock.  Also, Union Pacific closed up more than +5% after reporting stronger-than-expected Q4 EPS.

Gains in the Nasdaq 100 Thursday were limited due to weakness in chip stocks.  Also, higher bond yields on Thursday were negative for stocks, with the 10-year T-note yield up +2.7 bp to 4.638%.  Thursday's US economic news was negative for stocks after weekly US initial unemployment claims rose more than expected, and the Jan Kansas City Fed manufacturing sentiment survey was weaker than expected.

US weekly initial unemployment claims rose +6,000 to a 6-week high of 223,000, showing a weaker labor market than expectations of 220,000.  Also, weekly continuing claims rose +46,000 to a 3-year high of 1.899 million, showing a weaker labor market than expectations of 1.866 million.

The US Jan Kansas City Fed manufacturing sentiment survey was unchanged at -5, weaker than expectations of an increase to 0.

Earnings season is in full swing as companies report Q4 earnings results.  According to Bloomberg Intelligence, analysts estimate S&P 500 earnings grew by 7.5% y/y in Q4, the second-highest pre-season forecast in the past three years.

The markets are discounting the chances at 1% for a -25 bp rate cut at the January 28-29 FOMC meeting.

Overseas stock markets Thursday settled higher.  The Euro Stoxx 50 closed up +0.22%.  China's Shanghai Composite Index climbed to a 2-1/2 week high and closed up +0.51%.  Japan's Nikkei Stock 225 rose to a 2-week high and closed up +0.79%.

Interest Rates

March 10-year T-notes (ZNH25) Thursday closed down -6 ticks.  The 10-year T-note yield rose +2.7 bp to 4.638%.  March T-notes fell moderately on Thursday after a rally in the S&P 500 to a new record high curbed safe-haven demand for T-notes. Also, an increase in inflation expectations weighed on T-note prices after the 10-year breakeven inflation rate rose to a 1-week high Thursday of 2.457%.  Losses in T-notes were limited after weekly US jobless claims rose more than expected to a 6-week high, a dovish factor for Fed policy.

European government bond yields on Thursday moved higher.  The 10-year German bund yield rose +2.0 bp to 2.550%.  The 10-year UK gilt yield rose +0.3 bp to 4.636%.

ECB Governing Council member Escriva said, "The ECB has a monetary policy that is somewhat restrictive, and we need to move to a more neutral stance over the next semester or so."

Swaps are discounting the chances at 97% for a -25 bp rate cut by the ECB at its January 30 policy meeting.

US Stock Movers

Moderna (MRNA) closed up more than +10% to lead gainers in the S&P 500, adding to Wednesday's 7% rally after Oracle CEO Ellison touted the promise of AI in early cancer detection and the development of cancer vaccines. 

Booking Holdings (BKNG) closed up more than +4% to lead gainers in the Nasdaq 100 after it won a federal court order overturning a jury verdict that held it liable for violating the Computer Fraud and Abuse Act by scaping Ryanair's website. 

GE Aerospace (GE) closed up more than +6% after reporting Q4 adjusted EPS of $1.32, stronger than the consensus of $1.04, and announced plans to buy back $7 billion of stock. 

Union Pacific (UNP) closed up more than +5% after reporting Q4 EPS of $2.91, stronger than the consensus of $2.79.

Netflix (NFLX) closed up more than +3% after Wolfe Research upgraded the stock to outperform from peer perform with a price target of $1,100. 

Elevance Health (ELV) closed up more than +2% after reporting Q4 operating revenue of $44.99 billion, above the consensus of $44.83 billion, and raised its quarterly dividend by +4.9% to $1.71 per share from $1.63 per share.

Vistra Corp (VST) closed up more than +2% after Guggenheim Securities raised its price target on the stock to $212 from $177.

Palantir Technologies (PLTR) closed up more than +2% after Wedbush raised its price target on the stock to $90 from $75. 

Semiconductor stocks were under pressure Thursday and limited gains in the Nasdaq 100.  ARM Holdings Plc (ARM) closed down more than -7%, and Micron Technology (MU) closed down more than -4%.  Also, ASML Holding NV (ASML), Applied Materials (AMAT), and Lam Research (LRCX) closed down more than -3%.  In addition, Intel (INTC), KLA Corp (KLAC), and GlobalFoundries (GFS) closed down more than -1%.

Electronic Arts (EA) closed down more than -16% to lead losers in the S&P 500 and Nasdaq 100 after reporting preliminary Q3 net bookings of $2.22 billion, weaker than the consensus of $2.51 billion, and cutting its full-year net bookings forecast to $7.00 billion-$7.15 billion from a previous forecast of $7.50 billion-$7.80 billion, well below the consensus of $7.67 billion.

American Airlines Group (AAL) closed down more than -8% after forecasting a Q1 loss of up to -40 cents a share, much weaker than the consensus of a +1 cent profit. 

Plexus Corp (PLXS) closed down more than -10% after reporting Q1 revenue of $976.1 million, weaker than the consensus of $982.2 million, and forecasting Q2 revenue of $960 million-$1.00 billion, below the consensus of $1.01 billion. 

Acushnet Holdings (GOLF) closed down more than -9% after JPMorgan Chase downgraded the stock to underweight from neutral with a price target of $64. 

Veeva Systems (VEEV) closed down more than -2% after Goldman Sachs double-downgraded the stock to sell from buy with a price target of $200. 

Freeport-McMoRan (FCX) closed down more than -1% after reporting Q4 revenue of $5.72 billion, weaker than the consensus of $5.92 billion.

Generac Holdings (GNRC) is down more than -1% after OTR Global downgraded the stock to neutral from positive.

Earnings Reports (1/24/2025)

American Express Co (AXP), Crown Castle Inc (CCI), HCA Healthcare Inc (HCA), NextEra Energy Inc (NEE), and Verizon Communications Inc (VZ).