Market Trends: Earnings Boost Stock Performance Amid Mixed Economic Signals

The S&P 500 Index ($SPX) (SPY) closed Thursday with a gain of +0.21%, while the Dow Jones Industrials Index ($DOWI) (DIA) fell by -0.33%. The Nasdaq 100 Index ($IUXX) (QQQ) increased by +0.83%.

On Thursday, stock prices generally rose, supported by positive earnings reports and a decline in Treasury note yields. Notably, Tesla’s stock surged over +21% after announcing its largest quarterly profit in a year. United Parcel Service also saw an increase of more than +5% following better-than-expected Q3 adjusted earnings per share (EPS). Additionally, Lam Research’s stock rose over +5%, leading gains in the semiconductor sector after announcing its Q1 revenue exceeded estimates and predicting Q2 revenue above consensus levels. The yield on the 10-year Treasury note dropped -4.8 basis points to 4.198%.

However, the Dow Jones was negatively impacted by a -6% decline in International Business Machines (IBM), which reported Q3 revenue below expectations. Honeywell International also fell by more than -5% due to weaker-than-expected Q3 sales and a lowered full-year sales forecast.

Encouraging economic data released on Thursday improved the outlook for a soft economic landing, contributing to stock market gains. Weekly jobless claims unexpectedly decreased, suggesting strength in the labor market. Additionally, the October S&P manufacturing PMI rose more than anticipated, and September new home sales hit a 16-month high. On the contrary, the Chicago Fed’s national activity index for September fell unexpectedly to a five-month low.

Initial unemployment claims in the U.S. unexpectedly fell by -15,000 to reach 227,000, contrasting predictions of an increase to 242,000.

In September, the Chicago Fed national activity index dropped by -0.27 to a five-month low of -0.28, contrary to expectations for an increase to 0.50.

The October S&P manufacturing PMI improved by +0.5, reaching 47.8, surpassing expectations of 47.5.

Moreover, September new home sales rose by +4.1% month over month to a 16-month high of 738,000, exceeding forecasts of 720,000.

As corporate Q3 earnings reports continue to impact U.S. stocks, over 100 companies in the S&P 500 have reported earnings, with 76% exceeding estimates. Approximately 20% of S&P 500 companies are set to announce earnings this week. According to Bloomberg Intelligence, S&P 500 companies are projected to report an average +4.3% increase in quarterly earnings for Q3 compared to a year ago, a decrease from the +7.9% growth forecast in July.

Geopolitical tensions in the Middle East remain a concern for the markets. Alongside ongoing conflicts in Gaza, Israel has extended military operations in Lebanon against Hezbollah. The Israel Defense Force (IDF) has deployed an additional division of troops to southern Lebanon and is continuing airstrikes in Beirut’s southern suburbs. Moreover, markets are closely monitoring Israel’s response to recent missile attacks from Iran.

Currently, markets project a 95% probability of a -25 basis point rate cut during the FOMC meeting on November 6-7, while the likelihood of a -50 basis point cut stands at 0%.

Overseas stock markets displayed mixed results on Thursday. The Euro Stoxx 50 rose by +0.26%, while China’s Shanghai Composite fell by -0.68%. Japan’s Nikkei Stock 225 rebounded from a three-week low, closing up by +0.10%.

Interest Rates

December 10-year Treasury notes (ZNZ24) closed up by +8 ticks, with the yield on 10-year notes declining by -4.8 basis points to 4.198%. The rise in T-notes was partly driven by short-covering following Wednesday’s Fed Beige Book, which indicated flat economic activity in most regions of the U.S. since early September. However, T-notes retreated from higher levels on the back of positive U.S. economic indicators, notably the unexpected drop in initial unemployment claims and the rise in new home sales.

European government bond yields were mixed on Thursday. The 10-year German bund yield fell by -3.8 basis points to 2.266%, while the 10-year UK gilt yield rose to a three-and-a-half-month high of 4.269%, finishing up +3.7 basis points at 4.237%.

The Eurozone’s October S&P manufacturing PMI improved by +0.9, reaching a five-month high of 45.9, surpassing expectations of 45.1.

The Eurozone’s October S&P composite PMI showed minor growth, rising +0.1 to 49.7, in line with expectations.

Swaps are indicating a 100% probability of a -25 basis point rate cut by the ECB during the December 12 policy meeting, along with a 41% chance for a -50 basis point cut at the same meeting.

US Stock Movers

Tesla (TSLA) saw a significant rise of more than +21%, leading gains in the S&P 500 and Nasdaq 100, after reporting Q3 adjusted EPS of 72 cents, surpassing the consensus estimate of 60 cents. The company also raised its full-year capital expenditure forecast to above $11.0 billion, compared to a prior estimate of above $10.0 billion.

United Parcel Service (UPS) rose more than +5% after posting Q3 adjusted EPS of $1.76, exceeding the consensus estimate of $1.63.

Molina Healthcare (MOH) surged over +17% following its Q3 revenue announcement of $10.34 billion, well above the consensus forecast of $9.93 billion.

West Pharmaceutical Services (WST) climbed more than +15% after reporting Q3 net sales of $746.9 million, above expectations of $709.7 million, and increased its full-year net sales forecast to a range of $2.88 billion-$2.91 billion, higher than the prior forecast of $2.87 billion-$2.90 billion, also above consensus.

CBRE Group (CBRE) gained more than +8% after reporting Q3 revenue of $9.04 billion, surpassing the consensus of $8.78 billion.

Raymond James Financial (RJF) closed up by more than +7% after posting Q4 adjusted EPS of $2.95, exceeding the expected $2.43.

Lam Research (LRCX) also experienced an increase of over +5%, leading chip stocks after reporting Q1 revenue of $4.17 billion, above the consensus of $4.06 billion, along with a forecast for Q2 revenue between $4.0 billion and $4.6 billion, with the midpoint above the expectation of $4.22 billion. Other chip makers, such as ON Semiconductor (ON) and Texas Instruments (TXN), also reported gains of over +2%. GlobalFoundries (GFS), Micron Technology (MU), and NXP Semiconductors NV (NXPI) all rose by more than +1%, with Intel (INTC) closing up by more than +1%, leading the Dow Jones’ gainers.

T-Mobile US (TMUS) gained over +5% after releasing Q3 EPS of $2.61, surpassing the expected $2.43, and projected full-year postpaid net customer additions of 5.6 million to 5.8 million, above the consensus of 5.56 million.

Conversely, some companies faced losses. Newmont (NEM) fell over -14%, leading the S&P 500 losers, reporting Q3 sales of $4.61 billion, below the consensus of $4.69 billion. Teradyne (TER) dropped more than -11% after forecasting Q4 revenue between $710 million and $760 million, with the midpoint below expectations of $735.7 million.

International Business Machines (IBM) declined by more than -6%, leading the losses in the Dow Jones after reporting Q3 revenue of $14.97 billion, which was below the consensus of $15.05 billion.

Carrier Global (CARR) dropped more than -8% due to Q3 sales of $5.98 billion, significantly under the consensus of $6.56 billion, prompting a reduction in its full-year sales forecast to around $22.5 billion from an earlier estimate of $25.5 billion, also below the consensus level.

Honeywell International (HON) fell more than -5%—leading the Nasdaq 100 losses—after reporting Q3 sales of $9.73 billion, below expectations of $9.88 billion and reducing its full-year sales forecast to $38.6 billion to $38.8 billion from a previous range of $39.1 billion to $39.7 billion.

Hasbro (HAS) experienced a decline of over -6% after lowering its full-year consumer product revenue forecast, now predicting a drop of -12% to -14% instead of the previous estimate of -2% to -11%.

Textron (TXT) fell by more than -6% after Q3 adjusted EPS of $1.40 came in below the expected $1.51.

Keurig Dr Pepper (KDP) also closed down more than -4% after reporting Q3 net sales of $3.89 billion, which was below the consensus estimate of $3.92 billion.

Upcoming Earnings Reports (10/25/2024)

Aon PLC (AON), AutoNation Inc (AN), Avantor Inc (AVTR), Booz Allen Hamilton Holding Co (BAH), Carter’s Inc (CRI), Centene Corp (CNC), Colgate-Palmolive Co (CL), First Hawaiian Inc (FHB), Gentex Corp (GNTX), HCA Healthcare Inc (HCA), Medical Properties Trust Inc (MPW), Newell Brands Inc (NWL), Saia Inc (SAIA), Sun Communities Inc (SUI), and TFS Financial Corp (TFSL).

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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 in this article are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.

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