Market Dips Amid Mixed Corporate Earnings and Economic Indicators
The S&P 500 Index ($SPX) (SPY) fell -0.94% on Wednesday, while the Dow Jones Industrials Index ($DOWI) (DIA) dropped -0.96%. The Nasdaq 100 Index ($IUXX) (QQQ) saw a larger decline of -1.59%.
Rising Yields and Weak Economic Data Weigh on Stocks
Market declines intensified as the 10-year Treasury note yield rose by +3.0 basis points, reaching a new high not seen in nearly three months. In addition, disappointing home sales and reports from the Fed’s Beige Book also contributed to the negative sentiment.
Corporate Struggles Highlighted by Negative News
Some companies faced significant setbacks. McDonald’s shares fell by -5% after an E. coli outbreak linked to its Quarter Pounder sandwiches affected numerous customers across various states. Boeing’s stock dropped -1.69% following a Q3 report showing worse-than-expected negative adjusted free cash flow of -$1.96 billion. Coca-Cola also faced challenges, with its shares declining -2.00% after reporting a surprising -1% fall in Q3 unit case volume.
Positive Earnings Provide a Silver Lining
Despite these challenges, a few companies reported strong earnings. Texas Instruments rose +4%, and Teledyne Technologies increased +6% due to solid earnings that exceeded expectations. Additionally, Amphenol gained +4% after reporting higher-than-expected Q3 net sales and optimistic forecasts for the full year.
Mortgage Applications and Home Sales Decline
The latest data revealed US MBA mortgage applications decreased by -6.7% for the week ended October 18. The purchase mortgage sub-index fell -5.1%, while the refinancing sub-index dropped -8.4%. The average rate for a 30-year fixed mortgage remained unchanged at 6.52%.
September existing home sales delivered further bad news, unexpectedly declining -1.0% month-on-month to a 14-year low of 3.84 million, falling short of expectations for 3.88 million.
Federal Reserve Outlook and Geopolitical Tensions
The Federal Reserve’s Beige Book report painted a weaker picture of the US economy than suggested by hard data. With ongoing tensions in the Middle East, particularly Israel’s military actions in Lebanon and the looming threat from Iran, market anxieties continue to rise.
Investors are now pricing in a 92% chance of a -25 basis point rate cut at the upcoming FOMC meeting on November 6-7.
Global Stocks Present Mixed Signals
International markets showed mixed results on Wednesday. The Euro Stoxx 50 fell by -0.34%; however, China’s Shanghai Composite gained +0.52%, reaching a 1.5-week high. Japan’s Nikkei Stock 225 declined, closing down -0.80% at a 3-week low.
Interest Rate Update
December 10-year T-notes (ZNZ24) saw a decrease of -9 ticks, with the 10-year T-note yield rising +3.2 basis points to 4.240%. Recent remarks from the Fed suggest a cautious approach on interest rate reductions, causing T-note prices to drop.
In Europe, government bond yields experienced a mixed day. The 10-year German bund yield fell by -1.4 basis points to 2.304%, while the 10-year UK gilt yield increased by +3.4 basis points to 4.200%.
The Eurozone’s October consumer confidence index rose by +0.4, reaching a two-and-a-half-year high of -12.5, closely aligning with forecasts.
Key Stock Movements
Chip stocks were among the biggest losers, with Arm Holdings (ARM) down -6.67%, Qualcomm (QCOM) down -3.80%, Broadcom (AVGO) down -3.27%, and Nvidia (NVDA) down -2.81%. Qualcomm suffered after Arm canceled a license agreement allowing the use of its chip designs. Mega-cap tech stocks also weakened, with Meta Platforms (META) falling -3.15%, Amazon (AMZN) down -2.63%, and Tesla (TSLA) down -2.16%.
On the upside, Northern Trust (NTRS) rose +7.10% after reporting Q3 provisions for credit losses lower than expected, while Packaging Corp of America (PKG) rallied +5.62% with a stronger than anticipated EPS.
Upcoming Earnings Reports
Investors are looking forward to earnings reports from various companies including Allegion plc (ALLE), Arthur J Gallagher & Co (AJG), Capital One Financial Corp (COF), and many others on October 24, 2024.
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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.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
