The S&P 500 Index ($SPX) (SPY) Wednesday closed down -0.33%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.22%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.79%.
Stocks Wednesday relinquished early gains and posted moderate losses as a slide in chip stocks weighed on the broader market. Advanced Micro Devices closed down more than -10% to lead chip stocks lower after forecasting Q4 revenue below consensus. Also, some negative corporate news undercut stocks as Super Micro Computer plunged more than -32% after accounting firm Ernst & Young LLP resigned as SMCI’s auditor amid a US Justice Department probe of the company’s accounting practices.
Some strong earnings results on Wednesday were supportive of stocks. Alphabet rose more than +2% after it reported stronger-than-expected Q3 revenue late Tuesday. Also, Visa closed up more than +2% after reporting stronger-than-expected Q4 net revenue.
Better-than-expected US economic news Wednesday 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.
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 by +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 reported 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% 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 94% 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 Wednesday settled mixed. The Euro Stoxx 50 fell to a 5-week low and closed down -1.30%. 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) Wednesday closed down -1.5 ticks. The 10-year T-note yield rose +2.5 bp to 4.280%. T-notes Wednesday gave up an early advance and moved lower on the stronger-than-expected Oct ADP employment report. Also, signs of healthy consumer spending weighed on T-notes as US Q3 personal consumption rose more than expected. In addition, T-notes were pressured after European government bonds gave up an early rally and turned lower. Finally, an increase in inflation expectations was bearish for T-notes after the 10-year breakeven inflation rate climbed to a 2-1/2 week high Wednesday of 2.348%. T-note prices continue to be undercut by ideas that the US budget deficit will continue to be a major problem regardless of who wins next week's presidential election.
Some short covering supported T-notes Wednesday after the Treasury announced $125 billion of debt sales for its November quarterly refunding next week, right on consensus and unchanged from last quarter. Also, Wednesday’s weaker-than-expected US Q2 GDP report supported T-notes.
European government bond yields Wednesday moved higher. The 10-year German bund yield rose to a 3-month high of 2.388% and finished up +5.1 bp on that high. The 10-year UK gilt yield jumped to a 10-3/4 month high of 4.411% and finished up +3.7 bp at 4.352%.
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 20% for a -50 bp rate cut at the same meeting.
US Stock Movers
Advanced Micro Devices (AMD) closed down more than -10% to lead chip stock slower after forecasting Q4 revenue of $7.2 billion-$7.8 billion, the midpoint below the consensus of $7.55 billion. Also, GlobalFoundries (GFS) closed down more than -6%, and Qualcomm (QCOM) and ASML Holding NV (ASML) closed down more than -4%. In addition, Microchip Technology (MCHP), NXP Semiconductors NV (NXPI), and Micron Technology (MU) closed down more than -3%.
Super Micro Computer (SMCI) closed down more than -32% 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) closed down more than -27% after forecasting Q3 revenue of $875 million-$925 million, well below the consensus of $1.06 billion.
Caesars Entertainment (CZR) closed down more than -8% after reporting Q3 same-store net revenue of $2.87 billion, weaker than the consensus of $2.93 billion.
Chipotle Mexican Grill (CMG) closed down more than -7% after reporting Q3 same-store sales rose +6.0%, below the consensus of +6.4%.
Eli Lilly & Co (LLY) closed down more than -6% after cutting its full-year adjusted EPS estimate to $13.02-$13.52 from a previous estimate of $16.10-$16.60.
Otis Worldwide (OTIS) closed down more than -3% after reporting Q3 net sales of $3.55 billion, weaker than the consensus of $3.56 billion.
Caterpillar (CAT) closed down more than -2% after reporting Q3 adjusted EPS of $51.7, weaker than the consensus of $5.34.
Alphabet (GOOG) closed up more than +2% 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) closed 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.
Verisk Analytics (VRSK) closed up more than +4% to lead gainers in the Nasdaq 100 after reporting Q3 adjusted EPS continuing operations of $1.67, better than the consensus of $1.61.
Reddit Inc (RDDT) closed 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) closed up more than +2% 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) closed up more than +10% after reporting Q3 adjusted EPS continuing operations of 69 cents, stronger than the consensus of 53 cents.
Dayforce (DAY) closed 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) closed up more than +7% after reporting Q1 net sales of $289.5 million, stronger than the consensus of $280.2 million.
Snap Inc (SNAP) closed up more than +15% after reporting Q3 daily active users of 443 million, above the consensus of 441.16 million.
Earnings Reports (10/31/2024)
AES Corp/The (AES), Alliant Energy Corp (LNT), Altria Group Inc (MO), Amazon.com Inc (AMZN), Amcor PLC (AMCR), AMETEK Inc (AME), Apple Inc (AAPL), Aptiv PLC (APTV), Ball Corp (BALL), BorgWarner Inc (BWA), Bristol-Myers Squibb Co (BMY), Camden Property Trust (CPT), Cigna Group/The (CI), CMS Energy Corp (CMS), Comcast Corp (CMCSA), ConocoPhillips (COP), Coterra Energy Inc (CTRA), Eastman Chemical Co (EMN), Eaton Corp PLC (ETN), Entergy Corp (ETR), Erie Indemnity Co (ERIE), Estee Lauder Cos Inc/The (EL), Generac Holdings Inc (GNRC), Huntington Ingalls Industries (HII), IDEXX Laboratories Inc (IDXX), Ingersoll Rand Inc (IR), Intel Corp (INTC), Intercontinental Exchange Inc (ICE), International Paper Co (IP), IQVIA Holdings Inc (IQV), Juniper Networks Inc (JNPR), Kellanova (K), Kimco Realty Corp (KIM), Linde PLC (LIN), Mastercard Inc (MA), Merck & Co Inc (MRK), Norwegian Cruise Line Holdings (NCLH), Parker-Hannifin Corp (PH), Quanta Services Inc (PWR), Regeneron Pharmaceuticals Inc (REGN), Southern Co/The (SO), Teleflex Inc (TFX), Uber Technologies Inc (UBER), VICI Properties Inc (VICI), WEC Energy Group Inc (WEC), Willis Towers Watson PLC (WTW), WW Grainger Inc (GWW), Xcel Energy Inc (XEL), Xylem Inc/NY (XYL).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
