Markets Reflect Uncertain Economic Landscape as Earnings Season Progresses
The S&P 500 Index ($SPX) (SPY) closed down by -0.03% on Friday, while the Dow Jones Industrials Index ($DOWI) (DIA) dropped -0.61%. The Nasdaq 100 Index ($IUXX) (QQQ) saw an uptick of +0.59%.
Mixed Corporate Performance Shapes Market Dynamics
On Friday, stocks presented a mixed picture. The Dow Jones Industrials hit a two-week low, contrasting with the Nasdaq 100, which climbed to a three-and-a-quarter month high. Early positive movements in stocks diminished due to various corporate announcements. Western Digital experienced a more than +4% rise after reporting a Q1 adjusted EPS of $1.78, surpassing the consensus estimate of $1.72. Centene also rose by over +4% following a Q3 revenue report of $42.02 billion, exceeding the expected $38.12 billion, while raising its full-year revenue forecast. Notably, Booz Allen Hamilton surged more than +9% after exceeding Q2 adjusted EPS expectations, prompting a revision of its full-year estimate.
Concerns Arise Amidst Corporate Earnings
However, the Dow struggled following McDonald’s share price drop of nearly -3%. This decline was linked to a CDC report of an E. Coli outbreak from the chain, affecting 75 individuals across 13 states. The S&P 500 also turned negative as Mohawk Industries fell over -13% after lowering its Q4 adjusted EPS forecast, while HCA Healthcare dropped more than -8% due to weaker-than-expected Q3 EPS.
Bond Yields Reflect Economic Concerns
The yield on the 10-year Treasury note increased by +2.8 basis points to 4.240%, influenced by positive U.S. economic data. September capital goods new orders, excluding defense and aircraft, rose +0.5% month-over-month, surpassing expectations of +0.1%. Moreover, the University of Michigan’s consumer sentiment index for October was revised up +1.6 points, reaching a six-month high of 70.5, ahead of the predicted 69.0.
Q3 Earnings Season: Insights from S&P 500 Companies
As Q3 earnings season is underway, over 120 companies in the S&P 500 have reported, with 76% beating earnings estimates. Only about 20% of these companies released results this week. Bloomberg Intelligence forecasts a +4.3% increase in quarterly earnings for Q3 year-over-year, which is lower than the +7.9% consensus estimate from July.
Geopolitical Tensions and Market Responses
Tensions in the Middle East continue to affect market sentiment. The U.S. offered military support to Saudi Arabia amid escalating conflicts, while reports indicated that Iran has ordered its military to prepare for potential war. Markets are closely watching Israel’s response to missile incidents attributed to Iran on October 1.
Rate Cut Predictions Loom on the Horizon
Currently, the markets predict a 95% chance of a -25 basis point rate cut during the Federal Open Market Committee meeting on November 6-7, with no expectations for a -50 basis point cut at that time.
International Markets Show Divergent Trends
International stock markets displayed mixed results on Friday. The Euro Stoxx 50 edged up +0.15%, while China’s Shanghai Composite climbed +0.59%. Conversely, Japan’s Nikkei Stock 225 fell by -0.60%.
Interest Rates in Focus
December 10-year Treasury notes (ZNZ24) closed down -7 ticks, with the yield rising to 4.240%. Expectations for capital spending improved following better-than-expected economic indicators. The 10-year breakeven inflation rate dipped to a one-week low of 2.269%.
European Bond Markets: A Snapshot
European government bond yields presented a mixed picture. The 10-year German bund yield rose by +2.5 basis points to 2.291%, whereas the 10-year UK gilt yield fell by -0.4 basis points to 4.233%.
Supportive Financial Data from the Eurozone
In Eurozone news, September M3 money supply rose +3.2% year-over-year, exceeding the +2.9% forecast. Inflation expectations from the ECB also softened, with the one-year outlook falling to +2.4% and the three-year outlook down to +2.1%, the lowest since 2020.
German Economic Climate Improves
The German IFO business climate index rose +1.1 to reach 86.5, which was higher than the anticipated 85.6.
US Stock Movers: Key Changes to Watch
Among notable market movers, Western Digital (WDC) rose more than +4% after reporting solid Q1 earnings. GlobalFoundries (GFS) gained over +3%, and Intel (INTC) climbed more than +1%. In broader gains, Tapestry (TPR) surged more than +13% after a court blocked its acquisition of Capri Holdings.
Deckers Outdoor (DECK) increased by more than +10% after better-than-expected Q2 sales. Digital Realty Trust (DLR) also advanced by over +9% as it raised its full-year EBITDA guidance. Booz Allen Hamilton saw significant growth after exceeding EPS expectations and revising its outlook.
Meanwhile, Mohawk Industries took a significant hit, dropping more than -10% after lowering its growth expectations. The repercussions of health concerns led McDonald’s to drop nearly -3%, while HCA Healthcare reported disappointing EPS figures, sinking by more than -8%.
Upcoming Earnings Reports
Investors will be keen to watch for earnings from companies such as Brown & Brown Inc (BRO), Cadence Design Systems Inc (CDNS), CenterPoint Energy Inc (CNP), and Ford Motor Co (F) on October 28, 2024.
More Stock Market News from Barchart
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.
