Wednesday, October 16th, 2024
U.S. Markets Surge as Small-Caps Outperform Despite Economic Worries
Today, U.S. stock markets rallied, with the Dow Jones Industrial Average reaching another all-time closing high. The Dow climbed by +337 points, a gain of +0.79%. The S&P 500, which last achieved a record high on Monday, increased by +0.47% but fell short of its previous close by 14 points.
The tech-heavy Nasdaq lagged behind, ending the day up +0.28%, marking no new highs since July. Conversely, the small-cap Russell 2000 outperformed its peers with a notable gain of +1.73% for the session.
Small-Cap Stocks: A Surprising Leader Today
Typically, a strong day for small-caps signals a drop in bond yields, yet that’s not happening now. The 10-year Treasury yield is stable just above +4% (+4.014%), while the 2-year yield is slightly lower at +3.933%. So, what accounts for the Russell’s impressive performance today?
The “soft landing” economic scenario remains intact. Against many predictions from the past two years, the U.S. economy has avoided a recession so far. Though lingering risks exist, direct threats to economic stability aren’t presently evident.
Additionally, several stocks in the Russell 2000 are community banks, which could benefit from the solid performance of large banks during this earnings season. Notably, small-cap retail stocks, including Victoria’s Secret (VSCO), rose by +6.6% today, suggesting optimism among investors regarding these smaller players.
CSX Reports Quarterly Earnings Below Expectations
In other news, major trucking and logistics company CSX (CSX) slightly missed earnings expectations after the market closed today. The company reported earnings of 46 cents per share, 2 cents below the Zacks consensus, although this was a +12% increase year-over-year. Revenues of $3.62 billion fell short of the expected $3.68 billion, causing CSX’s stock to drop -3% in after-hours trading, pushing its year-to-date performance back into negative territory.
Check out the updated Zacks Earnings Calendar here.
What to Expect Tomorrow: Key Economic Data and Earnings Reports
Tomorrow morning, in addition to the usual Weekly Jobless Claims, several important economic indicators will be released. These include Retail Sales data for September, the Philly Fed survey for October, along with Industrial Production and Capacity Utilization figures before the market opens. Right after the bell, investors can expect updates on Business Inventories and a new Homebuilder Confidence Index.
As for Q3 earnings, look out for reports from Taiwan Semiconductor (TSM) and Dow component The Travelers Companies (TRV) early in the day, while Netflix (NFLX) and Intuitive Surgical (ISRG) will report their results after market close. Of these, TSM and Netflix hold Zacks Rank #2 (Buy) ratings heading into their earnings announcements.
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CSX Corporation (CSX): Free Stock Analysis Report
Netflix, Inc. (NFLX): Free Stock Analysis Report
Intuitive Surgical, Inc. (ISRG): Free Stock Analysis Report
The Travelers Companies, Inc. (TRV): Free Stock Analysis Report
Taiwan Semiconductor Manufacturing Company Ltd. (TSM): Free Stock Analysis Report
Victoria’s Secret & Co. (VSCO): Free Stock Analysis Report
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