The stock market closed higher Tuesday, despite a drop in consumer confidence, a decline in home prices and continued recession fears. Strong earnings from Medpace lifted other medical equipment stocks, while solid earnings reports from General Motors and Coca-Cola also helped.
Biogen, Raytheon and Brown & Brown dragged on the ticker tape.
The Nasdaq composite closed up 2.3%. The Dow Jones Industrial Average rose 1.1% and the S&P 500 lifted 1.6%. The small-cap Russell 2000 jumped 2.7%.
Volume rose on the Nasdaq but fell on the NYSE vs. the same time on Monday.
Meanwhile, the yield on the benchmark 10-year Treasury note slid 16 basis points to 4.09%, coming off Monday's 15-year high of 4.25%.
U.S. crude oil rose 0.9% to $85.35 per barrel.
The Innovator IBD 50 ETF gained 0.6%, led by fiber optics stock Clearfield. Clearfield is consolidating with a buy point of 130.11. Volatility is exceptionally high, making it tougher to make profits on a future breakout.
Consumer Confidence, Housing Prices Slide
The Conference Board's consumer confidence index slid 5.3 points to 102.5 in October, halting a two-month winning streak. Econoday expected a slide of just 1.8 points.
Confidence "wilted in October amid slowing economic growth, surging borrowing costs, and core inflation at 40-year highs. Still, excess savings are helping households to manage their spending cautiously," said Priscilla Thiagamoorthy, an economist at BMO Capital Markets.
And despite high inflation, the analyst predicts that "consumers plan to make more large purchases in the next six months."
Meanwhile, the Case-Shiller home price index continued to fall, dropping 1.3% in August. The index fell 0.7% in July.
Home prices fell more than expected in August, and a housing correction could be a big headwind to the economy in 2023.
"Benchmark house price indexes fell more than expected in August," said Bill Adams, chief economist for Comerica Bank. "The housing correction is most severe in the least affordable metros and in metros that had large concentrations of knowledge workers pre-pandemic. The housing correction will be a big drag on GDP in 2023 and will slow inflation as well."
The S&P Real Estate Select Sector ETF gained 4%, making it the top performer in all 11 S&P sectors. The S&P Energy Sector ETF was the worst performer but still managed to eke out a slight gain of 0.1%.
Stock Market: Mixed Earnings Receive Warm Welcome
Medpace reported Q3 earnings late Monday that blew past Wall Street estimates, accompanied by surprisingly strong guidance for 2023. MEDP stock soared more than 37% Tuesday.
Medpace earnings also provided a lift to other clinical contract research organization stocks. Iqvia, Icon and Charles River Labs all rose. Veeva, which provides software that helps manage clinical trials, closed 5.2% higher.
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Medpace, which conducts clinical trials mostly for small and mid-size biotech and biopharma customers, posted Q3 EPS of $2.05, up 59% from a year ago and 58 cents ahead of estimates. Revenue grew 30% to $383.7 million, beating the consensus by $26.5 million.
Coca-Cola raised Q4 growth guidance, lifting shares 2.5%.
3M closed 0.1% higher after dropping 3.7% at the open. The company missed Q3 revenue estimates and lowered full-year revenue guidance.
In other reports, Raytheon shares slid 1.5% after earnings fell 3.9% to $1.21 per share on 4.6% revenue growth to $16.95 billion. Analysts expected adjusted earnings to fall 9.5% to $1.14 per share. The maker of Stinger and Javelin missiles is coming off five consecutive quarters of decelerating earnings and revenue growth.
The contractor cut its fiscal 2022 revenue forecast to the $67 billion to $67.3 billion range, from a range of $67.75 billion to $68.75 billion. It also narrowed its adjusted earnings-per-share outlook to $4.70 to $4.80, from earlier views of $4.60 to $4.80.
More Earnings From Defense Stocks On Tap
Defense stocks have generally outperformed the market this year as the U.S. spent billions on aid to support Ukraine following Russia's invasion in February. As the war in Ukraine escalated, Russian President Vladimir Putin publicly warned of his willingness to resort to nuclear force in late September.
Defense contractors General Dynamics, Northrop Grumman and L3Harris Technologies are due to report later this week. Top dog Lockheed Martin reported strong results last week.
Barbeque maker Weber shot up 30% after receiving a nonbinding proposal from BDT Capital Partners to acquire all of the company's outstanding shares of Class A common stock for $6.25 per share.
Biogen stock erased some early losses but still shed 0.4% Tuesday, despite a beat-and-raise earnings report and continued enthusiasm for its experimental Alzheimer's treatment.
General Motors rallied 3.7% after reporting a profit of $2.25 per share, beating estimates by 37 cents. Revenue met expectations, lifting 56.4% to $41.89 billion.
GM stock is building a consolidation with a buy point of 42.46. It crossed the 50-day moving average today.
GM CEO Mary Barra cited strong demand for full-size trucks but admitted that inventory is rising, even though it remains under pre-pandemic levels.
Tech Futures Fall As MSFT, GOOGL Skid On Earnings; Rally Faces Key Test
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Halliburton closed up 1.1% after shooting up more than 4% in morning trading. The company beat Q3 top- and bottom-line estimates.
United Parcel Service fell 0.3% after reporting an earnings beat but coming up short on revenue.
Insurer Brown & Brown reported financial results that missed analyst expectations on both EPS and sales. BRO shares plunged 12.7%, to the lowest close since June 2022. It also marked the largest percentage decline since February 2008, when it fell 15.82%.
Alphabet reports after the closing bell, with analysts looking for a profit of $1.26 per share on $70.67 billion in revenue. GOOGL stock is expected to return to double-digit growth in 2023.
Microsoft's earnings report is also on tap this evening. Growth in the Azure cloud division showed signs of sputtering in the last report so all eyes will be looking at that important metric. Microsoft is forecast to earn $2.31 per share on $49.7 billion in Q3 revenue.
Follow Michael Molinski on Twitter @IMmolinski
