Markets React to Mixed Earnings and Fed Comments Amid Economic Outlook
S&P 500 Closes Slightly Up as Inflation Reports Impact Rates
The S&P 500 Index ($SPX) (SPY) closed up +0.02% on Wednesday, while the Dow Jones Industrials Index ($DOWI) (DIA) rose by +0.11%. The Nasdaq 100 Index ($IUXX) (QQQ) fell by -0.16%. Stocks ended the day mixed, supported by a favorable US October consumer price report. This report increased the likelihood of a 25 basis point rate cut by the Fed next month to 82%, up from 62% prior to the report. However, the Nasdaq 100 declined, primarily due to weaker performance from chip stocks.
Fed Officials Signal Cautious Approach to Rate Cuts
Additional gains in stocks followed comments from other Federal Reserve members favoring gradual rate cuts. Dallas Fed President Logan suggested that more cuts are likely, but emphasized the need for caution due to uncertainties about current monetary policy. St. Louis Fed President Musalem mentioned that the monetary policy remains well-suited to control inflation and maximize employment if inflation moves closer to the 2% target.
Consumer Price Index Meets Expectations
The US October Consumer Price Index (CPI) increased by +0.3% month-over-month and +2.6% year-over-year, matching forecasts. The core CPI, excluding food and energy, remained stable from September at +3.3% year-over-year, also in line with expectations.
Mortgage Applications Show Slight Uptick
In the week ending November 8, MBA mortgage applications rose by +0.5%. The purchase mortgage sub-index climbed by +1.9%, while the refinancing sub-index decreased by -1.5%. The average rate for a 30-year fixed mortgage rose from 6.81% to 6.86%.
Stock Market Anticipates Key Economic Reports
Stocks have seen significant gains recently, with the S&P 500, Dow Jones, and Nasdaq 100 reaching new record highs. Investor optimism is driven by speculation that President-elect Trump will enhance corporate profits through tax cuts and reduced regulations. Looking ahead, investors are keenly awaiting Fed Chair Powell’s comments on the economic outlook scheduled for Thursday, and Friday’s retail sales report is expected to show a +0.3% month-over-month increase.
Corporate Earnings Exceed Estimates
As the third-quarter earnings season nears conclusion, approximately 85% of S&P 500 companies have reported results. Of these, 75% exceeded estimates, slightly below the three-year average. According to Bloomberg Intelligence, S&P 500 companies have reported an average quarterly earnings increase of +8.4% year-over-year in Q3, outperforming preseason predictions.
International Markets Display Mixed Performance
Overseas markets on Wednesday also showed mixed results. The Euro Stoxx 50 fell to its lowest point in three months, closing down -0.09%. Conversely, China’s Shanghai Composite Index rose by +0.51%, while Japan’s Nikkei Index decreased by -1.66%.
Interest Rates Update
December 10-year T-notes (ZNZ24) showed no change on Wednesday. The yield rose by +2.3 basis points to 4.451%. T-notes initially increased following the CPI report, which eased inflation concerns. However, despite the mild inflation report, yields declined because the core CPI is still significantly above the Fed’s 2% target. Anticipation of President-elect Trump’s pro-growth policies is raising inflation concerns, hence weighing on T-note prices.
European Bond Yields Rise
European government bond yields increased on Wednesday, with the 10-year German bund yield rising by +2.8 basis points to 2.390%, and the UK gilt yield increasing by +2.1 basis points to 4.520%. An ECB official highlighted persistent core inflation and potential risks from new tariffs proposed by Trump, which could impact German GDP.
Stocks on the Move
Several US stocks experienced notable movements. Albemarle (ALB) jumped over +5% after RBC Capital Markets raised its price target to $133 from $108. Charter Communications (CHTR) and Cummins (CMI) both saw gains exceeding +3% due to significant business developments and upgrades.
Rivian Automotive (RIVN) surged more than +13% following an $800 million investment increase from Volkswagen AG. Meanwhile, Spotify Technology (SPOT) rose over +11% after optimistic projections for user growth.
Chip Stocks Weaken Amid Market Pressure
Chip stocks experienced significant pressure, with Micron Technology (MU) dropping by more than -4%. Other semiconductor companies, including ARM Holdings Plc (ARM) and Advanced Micro Devices (AMD), saw declines ranging from -3% to -6% as industry outlooks remained uncertain.
Weak Earnings Reports Lead to Declines
Notably, Groupon (GRPN) fell over -26% after disappointing revenue figures and a weaker year-end forecast. Similarly, Maplebear Inc (CART) and Rocket Companies (RKT) each reported earnings forecasts that fell short of expectations, resulting in drops of over -10% and -8%, respectively.
Upcoming Earnings Reports
Key earnings reports expected on November 14, 2024, include Advance Auto Parts Inc (AAP), Applied Materials Inc (AMAT), Globant SA (GLOB), Post Holdings Inc (POST), and Walt Disney Co/The (DIS).
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 are 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.
