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 mixed.  Positive news from big technology companies is boosting the broader market 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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