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Stocks Finish Higher on Strength in Tech Earnings
The S&P 500 Index ($SPX) (SPY) Friday closed up +0.41%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.69%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.72%.
Stocks on Friday settled moderately higher on some positive corporate earnings results. Amazon.com closed up more than +6% after forecasting Q4 operating income above consensus. Also, chip stocks rallied on Friday, led by a +7% jump in Intel after it reported better-than-expected Q3 revenue and forecasted Q4 revenue above consensus. Stocks looked past Friday’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 closed down more than -1% after reporting Q4 service revenue below consensus and weaker-than-expected China revenue. In addition, Amcor Plc closed down more than -7% after reporting Q1 net sales below consensus. Stock indexes fell back from their best levels Friday after bond yields rose, as the 10-year T-note yield climbed to a 3-3/4 month high.
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 Friday settled mixed. The Euro Stoxx 50 closed up +1.04%. 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) Friday closed down -14 ticks. The 10-year T-note yield rose +7.7 bp to 4.361%. Dec T-notes Friday fell to a 3-3/4 month low, and the 10-year T-note yield climbed to a 3-3/4 month high of 4.384%. T-notes Friday briefly whipsawed 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 gains 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 also being undercut by supply pressures ahead of next week’s $125 billion quarterly refunding operation of T-notes and T-bonds. In addition, T-note prices are weighed down 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 on Friday were mixed. The 10-year German bund yield rose +1.6 bp to 2.405%. The 10-year UK gilt yield fell -0.1 bp to 4.445%.
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 17% for a -50 bp rate cut at the same meeting.
US Stock Movers
Amazon.com (AMZN) closed up more than +6% 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) closed up more than +7% to lead gainers in the Dow Jones Industrials and 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, Marvell Technology (MRVL) closed up more than +5%, and Nvidia (NVDA) closed up more than +2%. In addition, Applied Materials (AMAT), Microchip Technology (MCHP), Qualcomm (QCOM), NXP Semiconductors NV (NXPI), Analog Devices (ADI), and Texas Instruments (TXN) closed up more than +1%.
Waters Corp (WAT) closed up more than +19% 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) closed up more than +18% 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) closed up more than +11% after reporting Q3 revenue of $13.80 billion, better than the consensus of $13.65 billion.
Cardinal Health (CAH) closed up more than +7% 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) closed up more than +4% after a St. Louis jury cleared the company regarding a claim that the company hid risks that its premature-infant formula could cause a bowel disease that severely sickened a baby boy.
Super Micro Computer (SMCI) closed down more than -10% 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) closed down more than -10% to lead losers in the S&P 500 after reporting Q3 revenue of $3.29 billion, weaker than the consensus of $3.46 billion.
Apple (AAPL) closed down more than -1% 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) closed down more than -7% after reporting Q1 net sales of $3.35 billion, below the consensus of $3.45 billion.
Eastman Chemical (EMN) closed down more than -3% after forecasting full-year adjusted EPS of $7.50-$7.70, the midpoint weaker than the consensus of $7.69.
PayPal Holdings (PYPL) closed down more than -2% after Phillip Securities downgraded the stock to accumulate from buy, citing valuation concerns.
BJ’s Restaurants (BJRI) closed down more than -8% after reporting Q3 restaurant-level operating margin of 11.7%, below the consensus of 12.5%.
Earnings Reports (11/4/2024)
American International Group Inc (AIG), AvalonBay Communities Inc (AVB), Celanese Corp (CE), Constellation Energy Corp (CEG), Diamondback Energy Inc (FANG), Eversource Energy (ES), Fidelity National Information (FIS), Fox Corp (FOXA), Franklin Resources Inc (BEN), Hologic Inc (HOLX), Loews Corp (L), Marriott International Inc/MD (MAR), NXP Semiconductors NV (NXPI), Palantir Technologies Inc (PLTR), Public Service Enterprise Group (PEG), Realty Income Corp (O), Revvity Inc (RVTY), Vertex Pharmaceuticals Inc (VRTX), Wynn Resorts Ltd (WYNN), Zoetis Inc (ZTS).
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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.