Broader Market Mostly Higher on Positive Big Tech News

The S&P 500 Index ($SPX) (SPY) today is up +0.15%, the Dow Jones Industrials Index ($DOWI) (DIA) is down by -0.38%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up by +0.51%.

Stock indexes today are moving higher, with the Dow Jones Industrials posting a new record high.  Positive news from big technology companies is boosting stocks today, with Netflix up more than +9% after reporting better-than-expected Q3 streaming paid customers.  Also, Apple is up more than +1% after its new iPhone 16 sales in China were reported to be up 20% in their first three weeks compared with last year’s model.  Today’s US housing news was mixed as Sep housing starts were above expectations, but Sep building permits, a proxy for future construction, were below expectations.

On the negative side, disappointing quarterly earnings results from American Express and Proctor & Gamble weigh the Dow Jones Industrials.

US Sep housing starts fell -0.5% m/m to 1.354 million, stronger than expectations of 1.350 million.  Sep building permits, a proxy for future construction, fell -2.9% m/m to 1.428 million, weaker than expectations of 1.460 million.

Middle East tensions continue to be a negative factor for stocks.  In addition to Gaza, Israel is waging a ground and air offensive in Lebanon to combat Hezbollah.  The Israel Defense Force (IDF) deployed a fourth division of troops in southern Lebanon while maintaining airstrikes in Beirut’s southern suburbs.  The markets are also awaiting Israel’s response to the October 1 missile barrage from Iran.

The results of corporate Q3 earnings may determine the near-term direction of stocks.  According to Bloomberg Intelligence, companies in the S&P 500 are expected to report an average +4.3% increase in quarterly earnings in Q3 from a year ago, down from +7.9% growth projected in July.

The markets are discounting the chances at 92% for a -25 bp rate cut at the November 6-7 FOMC meeting and at 0% for a -50 bp rate cut at that meeting.

Better-than-expected economic news from China supports global growth prospects and is positive for stocks.  China's Q3 GDP rose +4.6% y/y, stronger than expectations of +4.5% y/y. Also, China Sep industrial production rose +5.4% y/y, stronger than expectations of +4.6% y/y.  In addition, China Sep retail sales rose +3.2% y/y, stronger than expectations of +2.5% y/y.

Overseas stock markets today are higher.  The Euro Stoxx 50 is up by +0.69%.  China's Shanghai Composite climbed to a 1-week high and closed up by +2.91%.   Japan's Nikkei Stock 225 closed up by +0.18%.

Interest Rates

December 10-year T-notes (ZNZ24) today are up by +4 ticks.  The 10-year T-note yield is down by -1.8 bp to 4.073%. Dec T-notes today are slightly higher, and the 10-year T-note yield fell back from a 2-1/2 month high of 4.116%. T-notes have carryover support today from strength in European government bonds.  T-notes also garnered support from today’s mixed US housing news, showing Sep building permits, a proxy for future construction, fell more than expected. 

European government bond yields today are lower.  The 10-year German bund yield is down by -2.6 bp to 2.182%. The 10-year UK gilt yield is down -2.5 bp to 4.064%.

UK Sep retail sales ex-auto fuel unexpectedly rose +0.3% m/m versus expectations of -0.3% m/m.

Reuters reported that some ECB policymakers wanted to drop the pledge to keep monetary policy tight at Thursday's policy meeting as they thought inflation might stabilize at the ECB's 2% target a few quarters earlier than earlier predicted.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 100% for the December 12 policy meeting and a 43% chance of a -50 bp rate cut at the same meeting.

US Stock Movers

Netflix (NFLX) is up more than +9% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q3 streaming paid customers net change of +5.07 million, well above the consensus of +4.52 million. 

Apple (APPL) is up more than +1% to lead gainers in the Dow Jones Industrials after its new iPhone 16 sales in China are up 20% in their first three weeks compared with last year’s model. 

Lamb Weston Holdings (LW) is up more than +6% to lead gainers in the S&P 500 after the Wall Street Journal reported that activist investor Jana Partners plans to push the company to explore a sale.

Intuitive Surgical (ISRG) is up more than +6% after reporting Q3 adjusted EPS of $1.84, stronger than the consensus of $1.64.

Autoliv (ALV) is up more than +7% after reporting Q3 sales of $2.56 billion, better than the consensus of $2.55 billion.

Datadog (DDOG) is up more than +1% after UBS upgraded the stock to buy from neutral with a price target of $150.

Albertsons Cos (ACI) is up more than +1% after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $23. 

US-listed Chinese technology stocks are moving higher today after Chinese President Xi Jinping vowed to support the sector.  As a result, PDD Holdings (PDD), Alibaba Group Holding (BABA), NetEase (NTES), and JD.com (JD) are up more than +1%. 

CVS Health (CVS) is down more than -7% to lead losers in the S&P 500 after reporting preliminary Q3 adjusted EPS of $1.05-$1.10, well below the consensus of $1.70. 

American Express (AXP) is down more than -4% to lead losers in the Dow Jones Industrials after reporting Q3 revenue of $16.64 billion, below the consensus of $16.67 billion. 

Procter & Gamble (PG) is down more than -1% after reporting Q1 net sales of $21.74 billion, weaker than the consensus of $21.96 billion.

Coherent Corp (COHR) is down more than -2% after B Riley Securities downgraded the stock to neutral from buy.

MGP Ingredients (MGPI) is down more than -19% after cutting its full-year sales forecast to $695 million-$705 million from a previous forecast of $742million-$756 million, weaker than the consensus of $755.2 million. 

Schlumberger (SLB) is down more than -2% after warning that spending growth by oil explorers has slowed in the past few months.

Old Dominion Freight Line (ODFL) is down more than -1% after BMO Capital Markets downgraded the stock to market perform from outperform. 

Earnings Reports (10/18/2024)

Alaska Air Group Inc (ALK), Ally Financial Inc (ALLY), American Express Co (AXP), Comerica Inc (CMA), Fifth Third Bancorp (FITB), Procter & Gamble Co/The (PG), Regions Financial Corp (RF), Schlumberger NV (SLB).

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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.