The stock market rally had a solid week, with the Dow Jones and S&P 500 hitting record highs. The Nasdaq isn't far from all-time levels either. The small-cap Russell 2000 led, hitting a two-year closing high on Wednesday.
Taiwan Semiconductor Manufacturing spiked higher on strong earnings and guidance, led by AI chip demand. Nvidia and Broadcom, among TSMC's customers, rallied with other AI chipmakers. Dow insurance giant Travelers gapped up on earnings, while Goldman Sachs also rose on strong results. UnitedHealth plunged on weak guidance. Netflix and Intuitive Surgical made bullish move to close the week on earnings.
Stock Market Rally At Highs
The Dow Jones and S&P 500 reached record highs during the week while the Nasdaq isn't far off. The major indexes have risen for six straight weeks, though some of the gains are small. The small-cap Russell 2000 set a two-year closing high. Taiwan Semiconductor Manufacturing, Travelers and Netflix were earnings winners, with UnitedHealth a notable loser. The Treasury yield erased weekly losses on strong economic data.
Consumers Looking Strong
September retail sales muscled past forecasts even as August spending was revised higher. Overall sales rose a solid 0.4%, while sales outside of autos and gas rose 0.7%, more than double forecasts. For the quarter, total sales grew at a 5.3% annual rate vs., up from Q2's 1.8% rate, Pantheon Macroeconomics wrote. The U.S. economy now looks to have grown at a 3% pace for a second straight quarter in Q3, S&P Global said, up from its prior tracking estimate of 2.6%. The latest evidence of economic strength hasn't dented Wall Street's conviction that the Federal Reserve will cut its key rate by another 25 basis points on Nov. 7, but odds of a further quarter-point cut on Dec. 18 slipped below 75% after Thursday's data. Initial jobless claims unexpectedly fell 19,000 to 241,000 in the week through Oct. 12, but claims remain a bit elevated and could jump again amid a delayed impact from Hurricane Milton and Boeing layoffs.
Bullish Trend Continues; Two Warren Buffett Stocks In Buy Zones
Chip Giants ASML, TSMC Diverge
ASML shocked Wall Street with its disappointing third-quarter bookings and lowered 2025 guidance. ASML stock dived to a 2024 low. The Dutch semiconductor-equipment leader said gear for AI chips is providing upside, but other market segments are taking longer to recover. Meanwhile, Taiwan Semiconductor Manufacturing saw its shares rocket after the chip foundry delivered a big beat-and-raise earnings report. TSMC said its earnings rose 54% in Q3 while sales increased 39%, thanks to strong sales of chips for AI and smartphones. Nvidia, Broadcom and Arm Holdings also advanced.
Netflix Beats Q3 Estimates
The Internet television network comfortably topped Wall Street's targets and guided above views for the current period. Netflix earnings jumped 45% with revenue up 15% to $9.83 billion. The video streamer added 5.1 million subscribers vs. Q2, beating views for 4 million, to 282.7 million worldwide. For the fourth quarter, Netflix forecast EPS to double with sales up 15%. Netflix stock jumped on the news.
Intuitive Surgical Jumps On Q3 Beat
Intuitive Surgical reported a 26% EPS gain with revenue rising 17% to $2.01 billion. The number of procedures using Intuitive Surgical's best-known system, da Vinci, climbed 18% year over year feeding into 18% growth for sales of single-use instruments and accessories. Instruments and accessories generated $1.26 billion in sales. Shares jumped Friday.
Bank Earnings Top
Several more big banks reported with Goldman Sachs, Bank of America, Morgan Stanley and Citigroup all clearing estimates. Goldman Sachs broke out after reporting strong earnings well above views. BofA earnings fell, but shares rose in a buy zone. Morgan Stanley earnings moved out of a buy zone on strong results. rose. Citigroup's lower EPS beat, but shares reversed lower. All four banks saw double-digit gains in investment banking revenue. Net interest income increased for Goldman and Morgan Stanley, but fell slightly for Citi and Bank of America.
Insurance Earnings Boom
Travelers reported Q3 earnings per share soared 169% with revenue rising 12% to $11.9 billion, both beating. Net written premiums grew 8% to $11.32 billion. The Dow Jones giant's catastrophe losses grew to $939 million pretax vs. $850 million a year earlier. Progressive reported Q3 EPS spiked 110% while net premiums written jumped 25% to $19.45 billion. Progressive's operating EPS in September came to 83 cents with losses from Hurricane Helene representing of 75 cents, according to William Blair analyst Adam Klauber. Travelers stock gapped out to a new high. Progressive was little changed, holding support near highs.
United Airlines Soars On Earnings, Buyback
United Airlines reported a 9% EPS decline with revenue growth slowing to 2%, but both beat views. The carrier guided in line for Q4 EPS. United also announced a new $1.5 billion stock repurchase program. Shares skyrocketed to a four-year high, now up for 11 straight weeks.
UnitedHealth Tumbles On Outlook
UnitedHealth topped Q3 earnings and sales estimates, despite its medical cost ratio, or benefits as a share of premiums, rising more than expected to 85.2%. UNH stock dived from near a buy point to below its 50-day average on a reined-in outlook that signaled the cost issues, related to both Medicaid and Medicare, will persist into 2025. Elevance, which cut its 2024 EPS outlook by more than 10% amid a Q3 earnings miss, showed that the cost problems are industrywide.
Market Rally Fuels Retail Brokers
Rising markets in the third quarter fueled a trading surge at Interactive Brokers and Charles Schwab. But Interactive missed Q3 earnings estimates as costs rose. Revenue grew 19%, beating. Schwab ended a five-quarter streak of earnings declines with flat EPS and a 5% revenue gain, better than expected. Some analysts called signs of stabilizing sweep cash the highlight of Schwab's Q3 report. Charles Schwab stock jumped above the 200-day average and topping a trendline entry. Interactive Brokers fell from record highs but pared losses.
J&J, Abbott Rise On Earnings
Johnson & Johnson and Abbott Laboratories beat third-quarter expectations, but J&J cut its earnings outlook for the year, while Abbott raised the midpoint of its profit view. J&J earnings fell 9% while revenue grew 5% to $22.5 billion. J&J raised its sales outlook by $200 million at the midpoint, but cut its earnings forecast due to the completed acquisition of V-Ware. V-Ware makes implantable devices to treat chronic heart failure. Abbott's EPS climbed 6% while sales gained 5% to $10.64 billion, led by medical devices. Abbott kept its sales outlook, but nudged earnings expectations higher.
News In Brief
CSX slightly missed views with EPS up 9.5% and revenue up 1% to $3.62 billion. The rail giant also said that the SEC is reviewing its previously disclosed accounting errors. Shares tumbled.
American Express reported a 6% earnings gain, comfortably beating, but an 8% revenue rise to $16.64 billion just fell short. The Dow Jones payments giant noted that Q3 card member spending increased 6%, while card fee revenue grew 18%. American Express raised full-year EPS guidance but maintain its revenue target, which is slightly below consensus. Shares fell Friday but from near record highs.
