Stocks Supported by Strong Amazon and Intel Earnings

The S&P 500 Index ($SPX) (SPY) today is up +0.82%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.96%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.89%.

Stocks today are moving higher on some positive corporate earnings results.  Amazon.com is up more than +6% after forecasting Q4 operating income above consensus.  Also, chip stocks are climbing today, led by a +5% jump in Intel after it reported better-than-expected Q3 revenue and forecasted Q4 revenue above consensus.  Stocks looked past today’s weaker-than-expected US payroll and ISM manufacturing reports as the weakness was due to two hurricanes and labor strikes last month.

On the negative side, Apple is down more than -1% after reporting Q4 service revenue below consensus and weaker-than-expected China revenue.  In addition, Amcor Plc is down more than -7% after reporting Q1 net sales below consensus.

US Oct nonfarm payrolls rose by +12,000, weaker than expectations of +100,000 and the smallest increase in 3-3/4 years.  The weak payroll report was due to weather and strike disruptions.  Also, Sep payrolls were revised lower to +223,000 from the previously reported +254,000.  The Oct unemployment rate was unchanged at 4.1%, right on expectations.

US Oct average hourly earnings rose +4.0% y/y, right on expectations and the largest increase in 5 months.

The US Oct ISM manufacturing index unexpectedly fell -0.7 to a 15-month low of 46.5, weaker than expectations of an increase to 47.6.  The Oct ISM prices paid sub-index rose +6.5 to a 5-month high of 54.8, above expectations of 50.0. 

US Sep construction spending rose +0.1% m/m, stronger than expectations of no change.  Also, Aug was revised upward to +0.1% m/m from the previously reported -0.1% m/m.

Of the companies in the S&P 500 that have released Q3 earnings so far, 76% surpassed estimates.  According to Bloomberg Intelligence, companies in the S&P 500 are expected to report an average +4.3% y/y increase in quarterly earnings in Q3, down from the +7.9% y/y growth consensus seen in July.

The markets are discounting the chances at 99% 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 +0.91%.  China's Shanghai Composite Index closed down -0.24%.  Japan's Nikkei Stock 225 closed down -2.63%.

Interest Rates

December 10-year T-notes (ZNZ24) today are down by -4 ticks.  The 10-year T-note yield is up +3.5 bp at 4.319%.  Dec T-notes today fell to a 3-3/4 month low after briefly whipsawing higher when US Oct nonfarm payrolls posted their smallest increase in 3-3/4 years, a dovish factor for Fed policy.  Also, the US Oct ISM manufacturing index unexpectedly fell to a 15-month low. 

However, T-notes gave up their advance and turned lower as much of the weakness in the US economic reports was attributed to two hurricanes and labor strikes last month.  Also, price pressures picked up and weighed on T-notes after the Oct ISM prices paid sub-index rose more than expected to a 5-month high.  

T-notes are being undercut by supply pressures ahead of next week’s $125 billion quarterly refunding operation of T-notes and T-bonds.  Finally, T-note prices continue to be undercut by the idea that the US budget deficit will continue to be a major problem regardless of who wins next week's presidential election. 

European government bond yields today are moving lower.  The 10-year German bund yield is down -2.0 bp at 2.370%.  The 10-year UK gilt yield is down -5.9 bp at 4.387%.

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

US Stock Movers

Amazon.com (AMZN) is up more than +6% to lead gainers in the Dow Jones Industrials after reporting Q3 EPS of $1.43, stronger than the consensus of $1.16, and forecasting Q4 operating income of $16.0-$20.0 billion, with the midpoint above the consensus of $17.49 billion.

Intel (INTC) is up more than +5% to lead chip stocks higher after reporting Q3 revenue of $13.28 billion, better than the consensus of $13.02 billion, and forecasting Q4 revenue of $13.3 billion-$14.13 billion, with the midpoint above the consensus of $13.6 billion.  Also, Nvidia (NVDA) and Marvell Technology (MRVL) are up more than +2%.  In addition, Microchip Technology (MCHP), Qualcomm (QCOM), NXP Semiconductors NV (NXPI), and ON Semiconductor (ON) are up more than +1%. 

Waters Corp (WAT) is up more than +17% to lead gainers in the S&P 500 after reporting Q3 adjusted EPS of $2.93, above the consensus of $2.68, and raising its full-year adjusted EPS forecast to $11.67-$11.87 from a previous estimate of $11.55-$11.65, stronger than the consensus of $11.60.

Atlassian Corp (TEAM) is up more than +15% to lead gainers in the Nasdaq 100 after reporting Q1 revenue of $1.19 billion, stronger than the consensus of $1.15 billion, and forecasting Q2 revenue of $1.23 billion-$1.24 billion, above the consensus of $1.23 billion. 

Charter Communications (CHTR) is up more than +12% after reporting Q3 revenue of $13.80 billion, better than the consensus of $13.65 billion. 

Cardinal Health (CAH) is up more than +6% after reporting Q1 adjusted EPS of $1.88, stronger than the consensus of $1.62, and raising its full-year adjusted EPS estimate to $7.75-$7.90 from a previous estimate of $7.55-$7.70.

Abbott Laboratories (ABT) is up more than +5% after a St. Louis jury cleared the company regarding a claim that the company hid risks that its premature-infant formula can cause a bowel disease that severely sickened a baby boy.

Super Micro Computer (SMCI) is down more than -4% to lead losers in the Nasdaq 100, extending this week’s -40% rout after accounting firm Ernst & Young LLP resigned as SMCI’s auditor amid a US Justice Department probe of the company’s accounting practices.

AES Corp (AES) is down more than -6% after reporting Q3 revenue of $3.29 billion, weaker than the consensus of $3.46 billion.

Apple (AAPL) is down more than -1% to lead losers in the Dow Jones Industrials after reporting Q4 service revenue of $24.97 billion, weaker than the consensus of $25.27 billion, and reporting Q4 greater China revenue of $15.03 billion, below the consensus of $15.80 billion.

Amcor Plc (AMCR) is down more than -7% to lead losers in the S&P 500 after reporting Q1 net sales of $3.35 billion, below the consensus of $3.45 billion.

PayPal Holdings (PYPL) is down more than -2% after Phillip Securities downgraded the stock to accumulate from buy, citing valuation concerns. 

BJ’s Restaurants (BJRI) is down more than -4% after reporting Q3 restaurant-level operating margin of 11.7%, below the consensus of 12.5%. 

Earnings Reports (11/1/2024)

Cardinal Health Inc (CAH), Cboe Global Markets Inc (CBOE), Charter Communications Inc (CHTR), Chevron Corp (CVX), Church & Dwight Co Inc (CHD), Dominion Energy Inc (D), Exxon Mobil Corp (XOM), LyondellBasell Industries NV (LYB), Monster Beverage Corp (MNST), PPL Corp (PPL), Simon Property Group Inc (SPG), T Rowe Price Group Inc (TROW), Waters Corp (WAT).

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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.