Market Turmoil: Tech Concerns Weigh Heavy Despite Some Bright Spots
The S&P 500 Index ($SPX) (SPY) closed down -1.86% on Thursday, while the Dow Jones Industrials Index ($DOWI) (DIA) decreased by -0.90%. The Nasdaq 100 Index ($IUXX) (QQQ) fell sharply by -2.44%, marking a challenging day for stocks.
Market Overview: Disappointing Guidance and Economic Data
Thursday witnessed a significant sell-off in stocks, with the S&P 500 and Nasdaq 100 hitting three-week lows, and the Dow reaching a six-week low. Negative outlooks from Microsoft and Meta Platforms put pressure on tech stocks and overall market sentiment. These losses persisted despite mixed U.S. economic reports.
Positive Signs Amidst the Downturn
However, there were positive indicators as wage pressures eased, evidenced by the Q3 employment cost index showing the slowest growth rate in three years. Additionally, stronger-than-expected economic news fueled optimism for a potential soft landing.
Standout Performers in the Market
Amidst the turmoil, Paycom Software surged over +21% after announcing better-than-expected Q3 revenue and raising its full-year revenue forecast. Booking Holdings also saw gains, climbing more than +4% due to strong Q3 gross bookings. Etsy rose over +7%, exceeding revenue expectations.
Key Economic Indicators
Weekly initial unemployment claims unexpectedly dropped by -12,000 to 216,000, marking a five-month low and demonstrating a more robust labor market than anticipated. Meanwhile, the Q3 employment cost index rose by +0.8% quarter-over-quarter, falling short of the +0.9% expectation.
Personal spending in September rose by +0.5% month-over-month, surpassing the expected +0.4% increase, while personal income matched forecasts with a +0.3% rise. The core PCE price index remained unchanged from August, steady at +2.7% year-over-year, slightly better than the expected +2.6%.
Market Cautions Ahead of Earnings Reports
As investors remain cautious, they await earnings from major companies like Amazon and Apple, expected to report after Thursday’s close. Additionally, Friday’s U.S. unemployment report is on the horizon, with a forecast of +105,000 nonfarm payrolls amid potential strike and storm disruptions, and an anticipated steady unemployment rate of 4.1%.
During this peak week of corporate earnings, 76% of S&P 500 companies that reported thus far have exceeded estimates. Bloomberg Intelligence forecasts an average +4.3% year-over-year increase in Q3 earnings, down from July’s expectation of +7.9% growth.
The market currently anticipates a 94% chance of a -25 basis points rate cut during the upcoming FOMC meeting on November 6-7, while the odds of a -50 basis points cut sit at 0%.
Global Market Responses
International markets reflected mixed outcomes on Thursday. The Euro Stoxx 50 fell to a one-and-a-half month low, closing down by -1.19%. Conversely, China’s Shanghai Composite Index rose by +0.42%, though Japan’s Nikkei Stock 225 decreased by -0.50%.
Interest Rate Movements
On the bond front, December 10-year T-notes (ZNZ24) saw a decline of -7 ticks, with the yield dipping slightly to 4.276%. T-note prices faced pressure from a slide in European government bonds and the positive U.S. economic data, hinting at potential hawkish moves by the Fed. The ongoing U.S. budget deficit remains a concern, regardless of the upcoming presidential election outcomes.
In Europe, government bond yields rose, with the 10-year German bund yield climbing to a three-month high of 2.448% before closing at +2.390%. The UK gilt yield reached a ten-and-three-quarters month high of 4.531%.
Trends in the Eurozone
The Eurozone’s unemployment rate remained at a record low of 6.3%, offering a stronger labor market than anticipated. Eurozone inflation figures showed a +2.0% year-over-year rise in CPI, exceeding expectations.
Declines in German Retail Sales
Surprisingly, German retail sales saw an unexpected increase of +1.2% month-over-month, contrary to forecasts predicting a -0.6% decline. ECB Council member Panetta emphasized the need for continued measures to lower borrowing costs, aiming to prevent inflation from dropping below targets.
U.S. Stock Movers and Notable Changes
Among notable stock movements, Microsoft (MSFT) led losses on the Dow, closing down more than -5% despite exceeding Q1 EPS expectations, due to its forecast for Azure cloud revenue growth slowing to +31% to +32% for Q2. Chip stocks faced pressure, with GlobalFoundries (GFS), NXP Semiconductors NV (NXPI), and ON Semiconductor (ON) all closing down over -4%.
Meta Platforms (META) also dropped by more than -4%, failing to provide clear forecasts for future expenditures despite a strong Q3 performance. Huntington Ingalls Industries (HII) plummeted over -26% after reporting Q3 EPS significantly below forecasts.
Estee Lauder (EL) fell by more than -20%, reducing its forecast for adjusted EPS and cutting dividends. Super Micro Computer (SMCI) dropped over -11%, continuing a decline amid an accounting probe. MGM Resorts International (MGM) reported lower Q3 EPS than expected, closing down over -10%.
On the positive side, various companies posted significant gains. Paycom Software (PAYC) rose over +21%, while International Paper (IP) increased over +13%. Etsy and Norwegian Cruise Line also made gains, closing +7% and +6% respectively.
Upcoming Earnings Reports
Investors should look out for earnings releases from Cardinal Health Inc (CAH), Cboe Global Markets Inc (CBOE), Charter Communications Inc (CHTR), Chevron Corp (CVX), and others on November 1, 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 are solely for informational purposes. For further information, please refer to the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
