Market Summary: Stocks Climb on Earnings News and Economic Indicators

The S&P 500 Index ($SPX) (SPY) rose +0.35% on Friday, while the Dow Jones Industrials Index ($DOWI) (DIA) increased by +0.97%. The Nasdaq 100 Index ($IUXX) (QQQ) saw a modest gain of +0.17%.

The stock market ended the week on a positive note, with the S&P 500 reaching its highest level in a week and the Dow Jones Industrials achieving a peak not seen in a week and a half. Investor optimism surrounds the anticipated pro-business policies of the incoming Trump administration, which many believe will enhance corporate earnings.

Strong corporate updates also played a significant role in boosting stock prices on Friday. Super Micro Computer surged over +11% after announcing plans to file its overdue 10-K and 10-Q reports, aligning with Nasdaq regulations. Likewise, Copart’s shares jumped over +10% following its strong Q1 revenue report. Nonetheless, declines in Nvidia and Alphabet restricted advances in the Nasdaq 100.

Economic reports on Friday provided a mixed backdrop for trading. While the November S&P manufacturing and service PMIs both rose, the University of Michigan’s consumer sentiment index fell unexpectedly.

The US November S&P manufacturing PMI increased by +0.3, reaching a 4-month high of 48.8, slightly below forecasts of 48.9. In contrast, the services PMI surged by +2.0 to a 2.5-year high of 57.0, surpassing expectations for no change at 55.0.

In terms of consumer sentiment, the University of Michigan’s index unexpectedly dropped by -1.2, settling at 71.8, falling short of predictions which anticipated a rise to 73.9.

Global government bonds experienced a rally on Friday, lending support to equities after 10-year German bunds climbed to a one-month high. Additionally, T-note prices continued to rise after news emerged that President-elect Trump favors Kevin Warsh as the next Treasury Secretary, a move expected to resonate positively with bond markets due to Warsh’s history of advocating against high deficits.

In Europe, concerns regarding economic weaknesses limited stock market gains. The November S&P PMI for the Eurozone unexpectedly contracted, while Germany’s Q3 GDP was revised down. The ongoing tensions from the Ukraine-Russia conflict also added pressure on markets.

Bitcoin (^BTCUSD) reached a new record above $99,000, fueled by the belief that Trump will champion the cryptocurrency sector and loosen regulatory measures. Moreover, news of SEC Chair Gary Gensler’s upcoming departure in January lifted sentiment for crypto markets.

Out of the 90% of S&P 500 companies that have reported Q3 earnings, 75% exceeded analyst expectations, slightly below the three-year average. According to Bloomberg Intelligence, these companies have posted an average year-over-year earnings increase of +8.5% in Q3, more than double the initial forecasts.

Markets are pricing in a 53% chance of a -25 basis point rate cut at the upcoming December 17-18 FOMC meeting.

Internationally, stock markets closed mixed on Friday. The Euro Stoxx 50 gained +0.70%, while China’s Shanghai Composite index dropped to a two-and-a-half week low, down -3.06%. Meanwhile, Japan’s Nikkei Stock 225 climbed +0.68%.

Interest Rates

December 10-year T-notes (ZNZ24) closed the week up +4.5 ticks, with the yield on 10-year T-notes falling by -1.4 basis points to 4.408%. Support stemmed from a rally in European bonds and the anticipated appointment of Warsh, a former Fed governor, as Treasury Secretary, indicating possible stability in fiscal policies. However, T-notes did retreat from their highs after the positive PMI data pointed toward economic strength, suggesting a hawkish stance may be adopted by the Federal Reserve.

In Europe, government bond yields fell on Friday. The yield on 10-year German bunds dropped to a one-month low of 2.235% and settled down -7.6 basis points at 2.242%. Similarly, the 10-year UK gilt yield fell to a three-week low of 4.363%, concluding at -5.7 basis points lower, at 4.386%.

The Eurozone’s November S&P manufacturing PMI decreased by -0.8 to 45.2, contrary to expectations for stability at 46.0. The composite PMI also fell by -1.9 to 48.1, reflecting the steepest contraction pace in ten months.

Revisions to Germany’s Q3 GDP showed a downward adjustment to +0.1% q/q and -0.3% y/y, down from +0.2% q/q and -0.2% y/y previously reported.

Swaps indicate a 100% likelihood of a -25 basis point cut from the ECB at its December 12 meeting, as well as a 48% chance of a -50 basis point cut.

US Stock Movers

Super Micro Computer (SMCI) led gainers in the S&P 500 and Nasdaq 100, closing up more than +11% after announcing its intention to file delayed reports.

Copart (CPRT) rose by over +10% following impressive Q1 revenue of $1.15 billion, surpassing the $1.10 billion consensus. The Gap (GAP) gained more than +12% after reporting a Q3 operating margin of 9.13%, exceeding the 8.17% consensus, and raising its 2025 gross margin estimate to +220 basis points from a previous +200 basis points.

Elastic NV (ESTC) closed up over +14%, reporting Q2 adjusted EPS of 59 cents, well over the 38 cents consensus, and raising its 2025 adjusted EPS outlook to $1.68-$1.72 from $1.56, against a consensus of $1.53. Deckers Outdoor (DECK) ended up over +6%, following a buy initiation from Needham & Co. with a price target of $218.

Ross Stores (ROST) reported Q3 EPS of $1.48, above the consensus estimate of $1.40, raising its 2025 EPS forecast to $6.10-$6.17. Nike (NKE) also closed up more than +2% following a buy initiation from Needham & Co. with a target of $84. Viking Therapeutics (VKTX) gaining over +1% as B Riley Securities gave it a buy rating and a target of $109.

On the downside, Intuit (INTU) led losses, closing down more than -5%, after announcing Q2 adjusted EPS guidance significantly below consensus estimates. Nvidia (NVDA) fell over -3% due to its lesser-than-expected Q4 revenue forecast. Palo Alto Networks (PANW) dropped over -3% after being downgraded to reduce from hold by HSBC, targeting a price of $291.

Alphabet (GOOGL) fell more than -1% amid news of major regulatory changes proposed by the US Justice Department targeting Google. Reddit (RDDT) slumped over -7% due to reported website connectivity issues, while Tenet Healthcare (THC) and HCA Healthcare (HCA) each closed down more than -2% after Raymond James downgraded both firms.

Earnings Reports (11/25/2024)

Agilent Technologies Inc (A), Bath & Body Works Inc (BBWI), Blue Bird Corp (BLBD), Central Garden & Pet Co (CENT), Enanta Pharmaceuticals Inc (ENTA), Fluence Energy Inc (FLNC), Leslie’s Inc (LESL), New Jersey Resources Corp (NJR), Semtech Corp (SMTC), Woodward Inc (WWD), Zoom Video Communications Inc (ZM).

On the date of publication, Rich Asplund did not hold any positions in any of the securities mentioned in this article. All information and data herein are for informational purposes only. For more information, please view the Barchart Disclosure Policy here.
More news from Barchart

The views and opinions expressed here are those of the author and do not necessarily reflect those of Nasdaq, Inc.