Stocks Rise with Technology Gains Despite Mixed Economic Data
The S&P 500 Index ($SPX) (SPY) closed up +0.40% on Friday, while the Dow Jones Industrials Index ($DOWI) (DIA) increased by +0.09%. The Nasdaq 100 Index ($IUXX) (QQQ) rose by +0.66%.
Technology Sector Boosts Market Momentum
On Friday, stocks finished higher, highlighted by the Dow Jones Industrials reaching a new all-time high. Positive news from major tech companies helped lift the broader market. Notably, Netflix’s shares surged over +11% after reporting an increase in Q3 streaming subscribers, surpassing expectations. Apple also experienced growth, with its stock up more than +1% as iPhone 16 sales in China rose by 20% compared to the previous model during the same initial period. However, US housing data presented a mixed picture; September housing starts exceeded projections, while building permits fell short of expectations.
Earnings Disappointments and Mixed Signals from the Fed
On the downside, lower-than-expected quarterly earnings from American Express and Procter & Gamble negatively impacted their stock prices, limiting the gains in the Dow. Additionally, remarks from Atlanta Fed President Bostic were concerning for investors. He stated he is “in no rush to get to neutral on Fed policy,” stressing the importance of decreasing inflation back to the 2% target.
In terms of housing data, September saw housing starts decrease by -0.5% month-over-month to 1.354 million, just above the expected 1.350 million. In contrast, building permits dropped -2.9% to 1.428 million, below the anticipated 1.460 million.
Global Unrest and Economic Prospects
Tensions in the Middle East remain a looming concern for the markets. Apart from conflicts in Gaza, Israel’s military actions against Hezbollah in Lebanon add to investor anxiety. The Israel Defense Force (IDF) has recently activated a fourth division of troops in southern Lebanon, continuing airstrikes in surrounding areas. Investors are also closely monitoring Israel’s potential response to missile attacks from Iran.
Looking ahead, the outcome of corporate Q3 earnings could shape stock trends. Bloomberg Intelligence projects a +4.3% rise in earnings for S&P 500 companies compared to last year, a reduction from July’s forecast of +7.9% growth.
Furthermore, the market reflects a 95% chance of a -25 basis point rate cut during the upcoming November 6-7 FOMC meeting, while the probability of a -50 basis point cut stands at 0%.
Positive Economic Indicators from China
Encouraging economic news from China bodes well for global growth and equities. China’s Q3 GDP increased by +4.6% year-over-year, outperforming expectations of +4.5%. Additionally, September industrial production rose by +5.4%, again surpassing forecasts of +4.6%, and retail sales climbed +3.2%, well ahead of the +2.5% prediction.
International Markets Also Show Gains
Internationally, stock markets also closed higher on Friday. The Euro Stoxx 50 rose by +0.79%, China’s Shanghai Composite hit a one-week high with a +2.91% increase, and Japan’s Nikkei Stock 225 gained +0.18%.
Interest Rates Overview
In the interest rate sector, December 10-year T-notes (ZNZ24) closed up by +5.5 ticks, while the 10-year T-note yield fell by -1.8 basis points to 4.073%. The overall bond market saw gains as T-notes drew strength from European government bonds and mixed US housing data.
However, the strength in stocks limited the growth of T-notes, alongside Bostic’s comments, which weighed heavily on their performance.
European bond yields also experienced declines, with the 10-year German bund yield dropping -2.6 basis points to 2.183%, while the 10-year UK gilt yield fell to a two-week low at 4.056%.
Retail Sales and Monetary Policy Outlook in the UK
UK retail sales, excluding auto fuel, unexpectedly rose by +0.3% month-over-month, contrary to predictions of a -0.3% decrease. Some policymakers from the European Central Bank (ECB) have suggested loosening tight monetary policies sooner than anticipated, as they believe inflation might stabilize at target levels earlier than projected.
Swaps indicate a 100% chance of a -25 basis point rate cut from the ECB during the December 12 policy meeting, with a 46% chance of a -50 basis point cut.
Key US Stock Performers
Among notable movers in the US market, Netflix (NFLX) saw a significant rise of over +11% after announcing a net gain of +5.07 million streaming subscribers in Q3, surpassing the consensus of +4.52 million. Intuitive Surgical (ISRG) also climbed over +10% after reporting strong adjusted EPS of $1.84, above the expected $1.64.
Additionally, Lamb Weston Holdings (LW) gained more than +10%, driven by reports of activist investor Jana Partners encouraging a sale exploration. Apple (AAPL) rose over +1% following strong iPhone 16 sales in China.
Other notable gainers included Autoliv (ALV), which closed up over +5% and announced Q3 sales of $2.56 billion, slightly ahead of consensus. Albertsons Cos (ACI) rose more than +3% after an upgrade by Wells Fargo Securities.
Homebuilders saw gains following robust housing start data; PulteGroup (PHM) gained more than +2%, with other builders like DR Horton (DHI), Lennar (LEN), and Toll Brothers (TOL) up over +1%.
Conversely, CVS Health (CVS) led the S&P 500 decliners, down more than -5% after reporting Q3 adjusted EPS below consensus estimates. American Express (AXP) fell by more than -3% following a revenue miss in Q3, while Schlumberger (SLB) dropped over -4% due to slowed spending by oil explorers.
MGP Ingredients (MGPI) faced a massive decline of over -24%, reducing its full-year sales forecast significantly, which fell below market expectations. Other notable losers included Elevance Health (ELV) and CF Industries Holdings (CF).
Upcoming Earnings Reports
Investors should also keep an eye on earnings reports scheduled for October 21, 2024, from several companies including AGNC Investment Corp (AGNC), Alexandria Real Estate Equities (ARE), and Nucor Corp (NUE).
On the date of publication, Rich Asplund did not have positions in any of the securities mentioned in this article. This article serves informational purposes only; please refer to Barchart’s Disclosure Policy for more details.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
