Retail Sales, Philly Fed, TSM All Stronger than Expected

Thursday, October 17th, 2024

The biggest day of economic reports has begun, with numbers feeding Q3 GDP accounts yet to come. The only people disappointed this morning will be people who are looking for an economic downturn in the United States. It ain’t happening.

Off new closing highs, the Dow is up another +58 points at this hour. The S&P 500, nearing an all-time closing high of its own yesterday, is up another +25 points. The Nasdaq, having lagged the other industries over the past couple trading sessions, is up a strong +164 points at this hour. The 10-year Treasury bond yield is now up to +4.07% while the 2-year has crossed back over the +4.00% line.

U.S. Retail Sales Heat Up in September: +0.4%

The most important barometer for the U.S. economy reporting this morning are Retail Sales for September. The headline +0.4% is the strongest level we’ve seen since the summer, and notably above the unrevised +0.1% reported for August. Retail Sales is a major component of overall U.S. GDP, so this number suggests strengthening American growth as of last month.

Strip out volatile big-ticket auto sales and we see this tick even higher, to +0.5%. The +0.1% estimate was lower than the upwardly revised +0.2% now seen for the previous month, while ex-autos and gasoline sales ratchet up to +0.7% — the highest print since June, and more than double the +0.3% reported for August. The Control number, which goes up the food chain to numerous other economic metrics, was also +0.7%, following +0.3% previously.

While this is obviously good news for the overall economy, it will call into question the Fed’s dot-plot for reducing interest rates. Of late, the Fed has increased concern over jobs numbers beginning to unwind, while growth metrics had notably cooled. These Retail Sales numbers will be watched for signs of heating up (although heading into holiday shopping season, they are expected to).

Weekly Jobless Claims: 241K New, 1.867M Continuing

Speaking of jobs numbers, Initial Jobless Claims this morning remain elevated, but below where analysts were expecting. A headline 241K new jobless claims last week is well below the 260K expected, while the previous week has been revised from 258K to 260K. Gone are the sub-200K weeks — that much is clear. But this becomes a noisier time for employment statistics, as we move through the opening weeks of Q4.

Continuing Claims — reported a week in arrears from new claims — came in at 1.867 million, the highest weekly print since late July. It’s also the 19th straight week above 1.8 million longer-term jobless claims. This is not a red flag in itself, but the closer we get to 2 million, the more concerns about the labor market will stay a front-burner topic for the Fed.

Philly Fed Jumps Ahead to 10.3

Philly Fed Manufacturing for October took a big step forward this morning, posting a 10.3 compared with 3.0 expected and an unrevised 1.7 for September. This has been a good year overall for manufacturing in the sixth-largest city in the U.S.; only January and August posted negative figures here.

TSM Reports Strong Q3 Earnings

Taiwan Semiconductor TSM, the world’s premier microchip manufacturing foundry, posted very strong results for its Q3 this morning. Earnings per American Depositary Receipt (ADR) came in at US$1.94, 20 cents better than the Zacks consensus, and representing a true departure from the $1.29 per ADR reported in the year-ago quarter.

Revenues of $23.50 billion were also nicely ahead of the $22.72 billion analysts were looking for, which amounted to +36% growth year over year. Gross Margins reached 57.8% in the quarter, with guidance for 57-59% gross margins now expected. Revenues for next quarter zoom ahead of consensus, to a range of $26.1-26.9 billion from the $24.2 billion estimated. Analysts will now revise their numbers higher; the stock was already a Zacks Rank #1 (Strong Buy) ahead of its earnings report.

Check out the updated Zacks Earnings Calendar here.

The Travelers Beats in Q3: $5.24 per Share vs. $3.79

Dow Jones insurance component The Travelers TRV also put up tidy beats on both top and bottom lines for its Q3 this morning. Earnings of $5.24 per share easily outperformed the $3.29 analysts had been expecting, and well beyond the $1.95 per share reported in the year-ago quarter. Revenues of $11.85 billion also notched a beat over the Zacks consensus, by +1.42%. For more on TRV’s earnings, click here.

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