Mixed Market Activity as Earnings Reports and Global Tensions Emerge
Stocks Slip with Dow Reaching 1.5-Week Low Amid Disappointing Earnings
The S&P 500 Index ($SPX) (SPY) is down by -0.35%, the Dow Jones Industrials Index ($DOWI) (DIA) has decreased by -0.48%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down by -0.51% today.
Markets are experiencing a slight decline, with the Dow Jones hitting a one-and-a-half week low. Rising bond yields are pressuring stock prices, particularly as the 10-year Treasury note yield reaches a new 2-3/4 month high. Additionally, negative corporate news has negatively impacted several key stocks. McDonald’s shares have dropped over -5% following reports of an E. coli outbreak linked to its Quarter Pounder sandwiches, affecting dozens across multiple states. Boeing has seen a decline of more than -3% after its third-quarter cash flow results came in worse than expected. Coca-Cola’s stock is down over -2% as it reported a surprise -1% drop in its third-quarter unit case volume.
On a more positive note, Texas Instruments and Teledyne Technologies are both up over +4% after reporting better-than-expected third-quarter earnings per share (EPS). Meanwhile, Amphenol’s shares have risen by more than +3% following robust third-quarter net sales figures and a forecast of full-year sales that exceeded expectations.
In other financial news, US MBA mortgage applications fell -6.7% in the week ending October 18, with purchase mortgage applications down -5.1% and refinancing applications down -8.4%. The average rate for a 30-year fixed mortgage remained steady at 6.52%.
Conversely, September’s existing home sales unexpectedly decreased by -1.0% month-over-month, reaching a 14-year low of 3.84 million, falling short of forecasts that predicted a rise to 3.88 million.
Corporate earnings are significantly affecting US stocks. So far, about 90 companies in the S&P 500 have reported their earnings, with 76% exceeding expectations. This week, around 20% of S&P 500 firms are set to release their earnings, including heavyweights like Tesla, Boeing, and United Parcel Service. Analysts from Bloomberg Intelligence predict an average increase of +4.3% in quarterly earnings for S&P 500 companies compared to last year, a slight dip from the +7.9% growth expected in July.
Ongoing tensions in the Middle East also contribute to market instability. Armed conflict continues in Gaza, and Israel’s military is engaged in actions against Hezbollah in Lebanon, deploying additional troops and conducting airstrikes. The market is also watching closely for Israel’s potential response to a missile attack from Iran that occurred on October 1.
Investors are pricing in a 92% likelihood for a -25 bp rate cut during the Federal Open Market Committee (FOMC) meeting scheduled for November 6-7, while there is no expectation for a -50 bp cut at that time.
International markets have shown mixed performance today. The Euro Stoxx 50 is up by +0.02%, China’s Shanghai Composite closed +0.52% higher, reaching a 1.5-week peak, while Japan’s Nikkei Stock 225 fell by -0.80%, hitting a three-week low.
Interest Rates
December 10-year Treasury notes (ZNZ24) dipped by -9 ticks today. The yield on 10-year T-notes rose by +3.8 basis points, now at 4.246%. The recent pressures on T-note prices stem from Federal Reserve statements favoring a slower pace in reducing interest rates, alongside concerns over the escalating US budget deficit, regardless of the upcoming presidential election. Additionally, supply worries persist as the Treasury prepares to auction $13 billion of reopened 20-year T-bonds later today.
Yields on European bonds have also shifted upward. The yield on Germany’s 10-year bund increased by +1.0 bp to 2.327%, while the UK’s 10-year gilt yield reached a one-week high of 4.227%, rising by +5.9 bp.
In the Eurozone, the October consumer confidence index improved by +0.4, standing at -12.5—right in line with expectations and marking a 2.5-year high.
According to Reuters, discussions among ECB officials reveal a consideration of the need to adjust interest rates below the neutral level to invigorate the economy. Officials are contemplating dropping references to “restrictive” rates during their next policy statement to acknowledge potential economic risks.
Current swaps indicate a 100% chance for a -25 bp cut from the ECB in the upcoming December 12 policy meeting, alongside a 40% probability for a -50 bp cut.
US Stock Movers
Leading the declines in the Dow Jones, McDonald’s (MCD) shares are down more than -5% after the E. coli outbreak news. Boeing (BA) is down over -2% due to its negative adjusted free cash flow of -$1.96 billion, exceeding consensus expectations. Coca-Cola (KO) has fallen over -2% after unexpectedly reporting a -1% dip in third-quarter unit case volume, contrasting with predictions of +0.42% growth.
In the Nasdaq 100, CoStar Group (CSGP) is down more than -9% after reporting third-quarter revenue of $692.6 million—below the anticipated $696.1 million—while also cutting its full-year revenue forecast to $2.72 billion-$2.73 billion. Old Dominion Freight Line (ODFL) has decreased over -4% following weaker-than-expected quarterly operating income of $401.9 million. Boston Scientific (BSX) and Thermo Fisher Scientific (TMO) both saw declines of over -4% after reporting disappointing earnings outlooks.
Conversely, Northern Trust (NTRS) leads the S&P 500 gainers with an uptick of more than +7% after announcing a third-quarter provision for credit losses of $8.0 million—below expectations. Packaging Corp of America (PKG) has risen over +5% based on a stronger-than-expected adjusted EPS of $2.65. Texas Instruments (TXN) and Amphenol (APH) both posted gains exceeding +3% following solid earnings reports.
Also, Taylor Morrison Home Corp (TMHC) reported third-quarter revenue of $2.12 billion, surpassing the consensus of $1.95 billion, contributing to its +3% gain. Teledyne Technologies (TDY) is up more than +3% after better-than-expected adjusted earnings numbers, leading to an upgrade from Baird. Meanwhile, eBay (EBAY) has experienced an increase of over +1% following an upgrade from Needham & Co.
Earnings Reports (10/23/2024)
Align Technology Inc (ALGN), Ameriprise Financial Inc (AMP), Amphenol Corp (APH), AT&T Inc (T), Avery Dennison Corp (AVY), Boeing Co/The (BA), Boston Scientific Corp (BSX), CME Group Inc (CME), Coca-Cola Co/The (KO), GE Vernova Inc (GEV), General Dynamics Corp (GD), Globe Life Inc (GL), Hilton Worldwide Holdings Inc (HLT), International Business Machines (IBM), Lam Research Corp (LRCX), Las Vegas Sands Corp (LVS), Molina Healthcare Inc (MOH), Newmont Corp (NEM), NextEra Energy Inc (NEE), Northern Trust Corp (NTRS), Old Dominion Freight Line Inc (ODFL), O’Reilly Automotive Inc (ORLY), Raymond James Financial Inc (RJF), Rollins Inc (ROL), Roper Technologies Inc (ROP), ServiceNow Inc (NOW), Teledyne Technologies Inc (TDY), Teradyne Inc (TER), Tesla Inc (TSLA), Thermo Fisher Scientific Inc (TMO), T-Mobile US Inc (TMUS), Tyler Technologies Inc (TYL), United Rentals Inc (URI), Veralto Corp (VLTO), Westinghouse Air Brake Technologies Corp (WAB).
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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. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
