The S&P 500 Index ($SPX) (SPY) closed down -0.33% on Wednesday, along with the Dow Jones Industrials Index ($DOWI) (DIA), which fell -0.22%. The Nasdaq 100 Index ($IUXX) (QQQ) ended the day down -0.79%.
Chip Stock Slide Influences Broader Market
On Wednesday, stocks reversed early gains to register moderate losses, primarily driven by a decline in chip stocks. Advanced Micro Devices led the drop, closing down more than -10% after projecting Q4 revenue below analyst expectations. Furthermore, Super Micro Computer plunged over -32% following the resignation of its auditor, Ernst & Young LLP, amid a U.S. Justice Department investigation into its accounting practices.
Strong Earnings Support Market Stability
In contrast, some robust earnings reports provided support for the market. Alphabet’s shares rose more than +2% after it revealed stronger-than-expected Q3 revenue late Tuesday. Visa also finished the day up more than +2% due to better-than-anticipated Q4 net revenue results.
Positive Economic Data Boosts Investor Confidence
Better-than-expected U.S. economic news contributed positively, suggesting a “soft landing” for the economy. Q3 personal consumption was reported to have increased more than anticipated, and the October ADP employment report revealed that employers added the most jobs in 15 months.
Mortgage Applications Decline While Rates Rise
In the mortgage sector, U.S. MBA mortgage applications saw a slight drop of -0.1% in the week ending October 25. The purchase mortgage sub-index increased by +5.0%, while the refinancing sub-index decreased by -6.3%. Notably, the average 30-year fixed mortgage rate climbed by +21 basis points, reaching a three-month high of 6.73% compared to 6.52% the previous week.
Employment and GDP Data Show Mixed Signals
The October ADP employment change indicated an increase of +233,000, surpassing projections of +111,000 and marking the highest growth in 15 months. Additionally, U.S. Q3 GDP grew by +2.8% annually, slightly below the expected +2.9%. Meanwhile, personal consumption for Q3 rose by +3.7%, outpacing the anticipated +3.3%, and the Q3 core PCE price index eased to +2.2% from 2.8% in Q2.
Pending Home Sales See Strongest Growth in Years
In real estate, pending home sales soared by +7.4% month-over-month in September, compared to expectations of +1.9%, marking the largest increase in over four years.
Caution Prevails as Key Events Approach
Market caution is palpable ahead of several significant upcoming events. These include the peak of quarterly earnings reports this week, Thursday’s September PCE price deflator expected to ease, Friday’s October unemployment report, and next Tuesday’s U.S. election. Additionally, four of the Magnificent Seven tech stocks are set to announce their earnings this week, including Meta Platforms and Microsoft, with Amazon and Apple reporting on Thursday.
Q3 Earnings Season Shows Promising Results
During the ongoing corporate Q3 earnings season, 76% of S&P 500 companies that have reported so far exceeded estimates. Notably, Bloomberg Intelligence predicts an average increase of +4.3% year-over-year in S&P 500 quarterly earnings for Q3, a decline from the +7.9% growth anticipated in July.
Interest Rate Outlook Firmly Focused on Cuts
The markets currently predict a 94% chance of a -25 basis point rate cut at the FOMC meeting on November 6-7 and no chance for a -50 basis point cut at that meeting.
Mixed Results in Global Markets
International stock markets had a mixed session on Wednesday. The Euro Stoxx 50 dropped to a five-week low, closing down -1.30%. The Shanghai Composite index in China fell to a one-week low, closing down -0.61%. Conversely, Japan’s Nikkei Stock 225 rallied to a two-week high, finishing up +0.96%.
Interest Rates & U.S. Treasury Notes React
In the bond market, December 10-year T-notes (ZNZ24) decreased by -1.5 ticks. The yield on the 10-year T-note rose by +2.5 basis points to 4.280%. T-notes felt pressure following the strong ADP employment report and signs of solid consumer spending, indicated by the Q3 personal consumption data. At the same time, European government bonds also surrendered early gains, which added to the downward pressure on T-notes.
European Bonds See Increases
European government bond yields rose on Wednesday, with the 10-year German bund yield climbing to a three-month high of 2.388% and the 10-year UK gilt yield reaching a 10.75-month high of 4.411%.
Eurozone Economic Indicators Mixed
In the Eurozone, Q3 GDP grew by +0.4% quarter-over-quarter and +0.9% year-over-year, surpassing expectations. However, October economic confidence unexpectedly fell -0.7 to a six-month low of 95.6, falling short of the anticipated increase to 96.3.
Market Expectations on ECB Policy
Swaps indicate a 100% probability of a -25 basis point rate cut by the ECB at its meeting on December 12 and a 20% chance for a -50 basis point cut at that same meeting.
U.S. Stock Movers: Major Winners and Losers
Advanced Micro Devices (AMD) significantly impacted the market, closing down more than -10% after projecting Q4 revenue between $7.2 billion and $7.8 billion, which fell below the consensus estimate of $7.55 billion. Other chip stocks, such as GlobalFoundries (GFS), Qualcomm (QCOM), and ASML Holding NV (ASML), also experienced declines of more than -4%.
Super Micro Computer (SMCI) suffered a loss of over -32%, leading the S&P 500 and Nasdaq 100 after news of Ernst & Young resigning as its auditor amidst a DOJ investigation.
Further losses included Qorvo (QRVO), down more than -27% after sliding its Q3 revenue forecast to $875 million-$925 million, well below the $1.06 billion consensus.
On the other hand, Caesars Entertainment (CZR) fell by over -8%, Chipotle Mexican Grill (CMG) dropped more than -7%, Eli Lilly & Co (LLY) declined by -6%, and Otis Worldwide (OTIS) slid over -3% after missing earnings estimates.
Positive news came from Alphabet (GOOG), which rose by more than +2% after reporting Q3 revenue ex-TAC of $74.55 billion and Q3 cloud revenue of $11.35 billion. Garmin Ltd (GRMN) saw an impressive gain of over +23% after exceeding revenue expectations with Q3 sales of $1.59 billion. Verisk Analytics (VRSK) climbed over +4% following positive earnings results.
Reddit Inc (RDDT) surged by more than +41% after reporting adjusted EBITDA of $94.1 million, surpassing expectations and forecasting a strong Q4 EBITDA. In another positive note, Visa (V) also contributed to market gains.
Stocks Surge Following Strong Earnings Reports
Several companies saw significant increases in their stock prices after announcing impressive financial results.
Leading the Dow: Solid Revenue Performance
One notable performer was Company Name, which closed up more than +2% on the Dow Jones Industrial Average. This uptick followed a Q4 net revenue announcement of $9.62 billion, surpassing the forecast of $9.49 billion.
FMC Corp Surprises with Strong Earnings
FMC Corp (FMC) experienced a remarkable rise of over +10%. They reported Q3 adjusted earnings per share (EPS) of 69 cents, easily beating the expected 53 cents.
Dayforce Increases Revenue Forecast
Dayforce (DAY) also saw its stock close more than +7% higher after announcing Q3 revenue of $440.0 million, above the consensus estimate of $428.1 million. The company raised its full-year revenue forecast from $1.74 billion to $1.75 billion, further boosting investor confidence.
Bio-Techne Reports Encouraging Q1 Results
Bio-Techne (TECH) ended the day with a gain of more than +7%, reporting Q1 net sales of $289.5 million, which outpaced the consensus of $280.2 million.
Snap Inc Meets User Growth Expectations
In a strong performance, Snap Inc (SNAP) closed up over +15% after revealing that it had 443 million daily active users in Q3, exceeding the expected figure of 441.16 million.
Upcoming Earnings Reports (10/31/2024)
Looking ahead, several companies are scheduled to report earnings soon, including AES Corp/The (AES), Amazon.com Inc (AMZN), Apple Inc (AAPL), and Merck & Co Inc (MRK), among others.
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On the date of publication, Rich Asplund did not hold positions in any of the securities mentioned in this article. All information and data herein are for informational purposes only. For additional details, please refer to the Barchart Disclosure Policy here.
The opinions expressed in this article are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
