Stocks Fall on Higher Bond Yields and Mixed Earnings

The S&P 500 Index ($SPX) (SPY) today is down by -0.35%, the Dow Jones Industrials Index ($DOWI) (DIA) is down by -0.48%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down by -0.51%.

Stocks today are mildly lower, with the Dow Jones Industrials falling to a 1-1/2 week low.  Higher bond yields today are pressuring stocks as the 10-year T-note yield climbed to a new 2-3/4 month high.  Also, some negative corporate news is weighing on stocks, with McDonald’s down more than -5% after a severe E. coli outbreak was tied to its Quarter Pounder sandwiches and sickened dozens of people in several states.  Also, Boeing is down more than -3% after reporting a wider-than-expected Q3 negative adjusted free cash flow.  In addition, Coca-Cola is down more than -2% after reporting an unexpected -1% decline in Q3 unit case volume. 

On the positive side, Texas Instruments and Teledyne Technologies are up more than +4% after reporting stronger-than-expected Q3 EPS.  Also, Amphenol is up more than +3% after reporting better-than-expected Q3 net sales and forecasting full-year sales above consensus.

US MBA mortgage applications fell -6.7% in the week ended October 18, with the purchase mortgage sub-index down -5.1% and the refinancing mortgage sub-index down -8.4%.  The average 30-year fixed-rate mortgage was unchanged from the prior week at 6.52%.

US Sep existing home sales unexpectedly fell -1.0% m/m to a 14-year low of 3.84 million, weaker than expectations of an increase to 3.88 million.

Corporate Q3 earnings are impacting US stocks.  About 90 companies in the S&P 500 have released earnings so far, with 76% announcing earnings that surpassed estimates.  Roughly 20% of S&P 500 companies are due to report earnings this week, including Tesla, Boeing, and United Parcel Service.  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 the +7.9% growth consensus seen in July.

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 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.

Overseas stock markets today are mixed.  The Euro Stoxx 50 is up by +0.02%.  China's Shanghai Composite rose to a 1-1/2 week high and closed up by +0.52%.  Japan's Nikkei Stock 225 fell to a 3-week low and closed down by -0.80%.

Interest Rates

December 10-year T-notes (ZNZ24) today are down by -9 ticks.  The 10-year T-note yield is up +3.8 bp at 4.246%.  Dec T-notes today dropped to a 3-month low, and the 10-year T-note yield climbed to a 2-3/4 month high of 4.256%.  T-note prices have been under pressure over the past week as recent Fed comments suggest policymakers favor a slower pace for reducing interest rates.  Yields are also climbing on concern that whoever wins the US presidential election next month, the US budget deficit will be a major problem going forward.  In addition, supply pressures are bearish for T-notes as the Treasury will auction $13 billion of reopened 20-year T-bonds later today. 

European government bond yields today are moving higher.  The 10-year German bund yield is up +1.0 bp at 2.327%.  The 10-year UK gilt yield rose to a 1-week high of 4.227% and is up +5.9 bp at 4.225%.

The Eurozone Oct consumer confidence index rose +0.4 to a 2-1/2 year high of -12.5, right on expectations.

Reuters reported today that some ECB officials are starting to debate whether interest rates will need to move below the neutral level to stimulate economic activity and that officials would like to drop the reference to "restrictive" rates in its next policy meeting statement to show they are taking downside risks seriously.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 100% for the December 12 policy meeting and a 40% chance of a -50 bp rate cut at the same meeting.

US Stock Movers

McDonald’s (MCD) is down more than -5% to lead losers in the Dow Jones Industrials after reports that a severe E. coli outbreak was tied to its Quarter Pounder sandwiches and sickened dozens of people in several states. 

Boeing (BA) is down more than -2% after reporting Q3 negative adjusted free cash flow of -$1.96 billion, wider than the consensus of -$1.87 billion. 

Coca-Cola (KO) is down more than -2% after reporting an unexpected -1% decline in Q3 unit case volume, weaker than expectations of +0.42%.

CoStar Group (CSGP) is down more than -9% to lead losers in the Nasdaq 100 after reporting Q3 revenue of $692.6 million, weaker than the consensus of $696.1 million, and cut its full-year revenue forecast to $2.72 billion-$2.73 billion from a prior forecast of $2.74 billion-$2.75 billion, below the consensus of $2.75 billion.

Old Dominion Freight Line (ODFL) is down more than -4% after reporting Q3 operating income of $401.9 million, weaker than the consensus of $408.9 million.

Boston Scientific (BSX) is down more than -4% after saying during an earnings call that it is pausing a trial of its Farapulse ablation system due to “a few unanticipated observations.”

Thermo Fisher Scientific (TMO) is down more than -3% after forecasting full-year revenue of $42.4 billion-$43.3 billion, the midpoint below the consensus of $42.9 billion.

Qualcomm (QCOM) is down more than -1% after Arm Holdings Plc canceled a license that allowed Qualcomm to use its intellectual property to design chips. 

Northern Trust (NTRS) is up more than +7% to lead gainers in the S&P 500 after reporting Q3 provision for credit losses of $8.0 million, below the consensus of $9.99 million.

Packaging Corp of America (PKG) is up more than +5% after reporting Q3 adjusted EPS of $2.65, stronger than the consensus of $2.49.

Texas Instruments (TXN) is up more than +3% to lead gainers in the Nasdaq 100 after reporting Q3 EPS of $1.47, stronger than the consensus of $1.37. 

Amphenol (APH) is up more than +3% after reporting Q3 net sales of $4.04 billion, well above the consensus of $3.81 billion, and forecasting full-year sales of $14.85 billion-$14.95 billion, stronger than the consensus of $14.62 billion.

Baker Hughes (BKR) is up more than +3% after reporting Q3 adjusted EPS of 67 cents, better than the consensus of 61 cents.

Taylor Morrison Home Corp (TMHC) is up more than +3% after reporting Q3 revenue of $2.12 billion, stronger than the consensus of $1.95 billion. 

Teledyne Technologies (TDY) is up more than +3% after reporting Q3 adjusted EPS of $5.0, better than the consensus of $4.97.  Baird upgraded the stock to outperform from neutral with a price target of $182.

eBay (EBAY) is up more than +1% after Needham & Co upgraded the stock to buy from hold with a price target of $72.

Earnings Reports (10/23/2024)

Align Technology Inc (ALGN), Ameriprise Financial Inc (AMP), Amphenol Corp (APH), AT&T Inc (T), Avery Dennison Corp (AVY), Boeing Co/The (BA), Boston Scientific Corp (BSX), CME Group Inc (CME), Coca-Cola Co/The (KO), GE Vernova Inc (GEV), General Dynamics Corp (GD), Globe Life Inc (GL), Hilton Worldwide Holdings Inc (HLT), International Business Machine (IBM), Lam Research Corp (LRCX), Las Vegas Sands Corp (LVS), Molina Healthcare Inc (MOH), Newmont Corp (NEM), NextEra Energy Inc (NEE), Northern Trust Corp (NTRS), Old Dominion Freight Line Inc (ODFL), O'Reilly Automotive Inc (ORLY), Raymond James Financial Inc (RJF), Rollins Inc (ROL), Roper Technologies Inc (ROP), ServiceNow Inc (NOW), Teledyne Technologies Inc (TDY), Teradyne Inc (TER), Tesla Inc (TSLA), Thermo Fisher Scientific Inc (TMO), T-Mobile US Inc (TMUS), Tyler Technologies Inc (TYL), United Rentals Inc (URI), Veralto Corp (VLTO), Westinghouse Air Brake Technol (WAB).

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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.