Markets Surge Post-Election with New Records Amid Economic Data Reactions
Major Indices Set All-Time Highs Following Fed Policy Changes
The S&P 500 Index ($SPX) (SPY) closed up +0.74% on Thursday, while the Dow Jones Industrials Index ($DOWI) (DIA) remained unchanged. The Nasdaq 100 Index ($IUXX) (QQQ) gained +1.54%.
Following the recent elections, stocks maintained their rally, with the S&P 500, Dow Jones, and Nasdaq 100 hitting new all-time highs. Market optimism stems from expectations that President-elect Trump will enhance corporate profits through tax cuts and less regulation. Chip stocks played a significant role in this rise, highlighted by ARM Holdings Plc’s +4% surge after reporting stronger-than-expected Q2 earnings and revenue. Conversely, JPMorgan Chase fell more than -4% after Baird downgraded its rating to underperform, negatively impacting the Dow.
Federal Reserve’s Move and Economic Indicators
Stock indexes climbed further Thursday afternoon after the Federal Open Market Committee (FOMC) announced a cut to the fed funds target range by -25 basis points, lowering it to 4.50%-4.75% from 4.75%-5.00%. The committee indicated risks to economic goals were “roughly in balance.”
Economic updates were mixed. Weekly jobless claims rose by +3,000 to 221,000, indicating a stronger labor market than the expected 222,000. Third-quarter nonfarm productivity increased by +2.2%, falling short of the +2.5% forecast, while Q1 unit labor costs rose +1.9%, exceeding expectations of +1.0%. In September, consumer credit grew by +$6.002 billion, below the expected +$12.173 billion.
Global Market Reactions and Company Performances
Fed Chair Powell mentioned that while inflation approaches the Fed’s goals, core inflation remains high. He also noted, “We don’t think it’s a good time to be doing a lot of forward guidance,” acknowledging uncertainty regarding future economic policy changes.
On the global stage, equities were boosted by a +2% rise in China’s Shanghai Composite index, which reached a four-week high, suggesting positive trends in China’s economy. Recent data showed China’s October exports climbed by +12.7% year-on-year, surpassing the anticipated +5.0%, marking the largest increase in over two years. However, China’s imports declined by -2.3%, slightly worse than expected.
So far, 78% of S&P 500 companies reporting Q3 earnings have exceeded estimates. Bloomberg Intelligence forecasts an average +4.3% year-on-year increase in quarterly earnings this Q3, down from the previously expected +7.9% growth noted in July. Markets now anticipate a 71% chance of a -25 basis point rate cut at the FOMC meeting on December 17-18.
Interest Rates and Bond Market Dynamics
December 10-year Treasury notes (ZNZ24) closed up +20.5 ticks, with the 10-year T-note yield dropping -12.0 basis points to 4.312%. This rally followed the FOMC’s decision to cut rates, coupled with bond dealers covering short hedges from recent Treasury auctions. Nevertheless, the positive labor market news and weaker-than-expected productivity numbers tempered gains, while the climb in the S&P 500 to a record high reduced safe-haven demand for T-notes.
European bond yields experienced mixed results. The 10-year German bund yield rose to a three-and-a-half month high of 2.498%, finishing at +4.0 basis points to 2.445%. In contrast, the 10-year UK gilt yield fell -6.4 basis points to 4.498%.
In further economic data, Eurozone September retail sales increased by +0.5% month-on-month, outpacing expectations of +0.4%. Additionally, German trade data showed a stronger-than-expected outcome, with September exports declining by -1.7% against anticipated -2.4%, while imports rose +2.1% versus projections of +0.6%.
Corporate Highlights and Earnings Reports
Major stock movers on Thursday included ARM Holdings Plc (ARM), which rose over +4% after reporting Q2 revenue of $844 million, higher than the consensus estimate of $810.9 million. Intel (INTC) also increased by more than +4%, leading the gainers in the Dow Jones. Other notable performers included Applied Materials (AMAT), Advanced Micro Devices (AMD), Marvell Technology (MRVL), and Lam Research (LRCX), each up over +3%.
EPAM Systems (EPAM) saw a significant jump of over +14% following its Q3 revenue of $1.17 billion, surpassing the consensus. Warner Bros Discovery (WBD) rose by more than +11% after announcing total subscribers of 110.5 million, exceeding expectations. McKesson (MCK) also performed well, gaining over +10% with better-than-expected Q2 adjusted EPS.
On the downside, Match Group (MTCH) led the S&P 500 declines, down more than -17% after reporting Q3 revenue below expectations. MercadoLibre (MELI) dropped more than -16% following weaker-than-expected EBITDA results. Corteva (CTVA) cut its annual sales forecast, leading to a more than -5% decline, while JPMorgan Chase (JPM) dropped over -4% after being downgraded by Baird.
Earnings Reports (11/8/2024)
Upcoming reports include Advanced Drainage Systems Inc (WMS), Baxter International Inc (BAX), CNH Industrial NV (CNH), Dillard’s Inc (DDS), Flowers Foods Inc (FLO), Fortrea Holdings Inc (FTRE), Lamar Advertising Co (LAMR), NRG Energy Inc (NRG), Paramount Global (PARA), RB Global Inc (RBA).
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On the date of publication, Rich Asplund did not hold positions in any securities mentioned in this article. All information in this article is for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
