Stocks Finish Higher as Q1 Earnings Impress

The S&P 500 Index ($SPX) (SPY) Tuesday closed up +1.20%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.69%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +1.51%. 

US stock indexes closed moderately higher on Tuesday, with the Dow Jones Industrials climbing to a 1-1/2 week high. Better-than-expected Q1 earnings results supported stocks Tuesday.  Stock indexes extended their gains after a weaker-than-expected US Apr S&P manufacturing PMI report knocked bond yields lower. 

Globe Life closed up more than +14% after raising its full-year operating EPS estimate.  Also, General Electric closed up more than +8% after raising its GE Aerospace full-year operating profit estimate.  In addition, Danaher closed up more than +7% after reporting better-than-expected Q1 sales.

On the negative side, LKQ Corp closed down more than -14% after reporting Q1 revenue below consensus. Also, MSCI Inc. closed down more than -13% after reporting weaker-than-expected Q1 operating revenue.  In addition, PepsiCo closed down more than -2% after forecasting full-year organic revenue below consensus.

Q1 corporate earnings take center stage for stocks with 180 of the S&P 500 companies, or more than 40% of total capitalization, scheduled to report earnings this week, including four of the “Magnificent Seven” megacap technology companies.  Tesla will report after Tuesday’s close, Meta Platforms will report on Wednesday, and Alphabet and Microsoft will report on Thursday. 

The US Apr S&P manufacturing PMI unexpectedly fell -2.0 to a 4-month low of 49.9 versus expectations of an increase to 52.0.

US Mar new home sales rose +8.8% m/m to a 6-month high of 693,000, stronger than expectations of 668,000.

The US Apr Richmond Fed manufacturing survey rose +4 to -7, stronger than expectations of -8.

The markets are discounting the chances for a -25 bp rate cut at 3% for the next FOMC meeting on April 30-May 1 and 14% for the following meeting on June 11-12.

Overseas stock markets Tuesday settled mixed.  The Euro Stoxx 50 rose to a 1-week high and closed up +1.44%.  China's Shanghai Composite closed down -0.74%.  Japan's Nikkei Stock Index closed up +0.30%.

Interest Rates

June 10-year T-notes (ZNM24) on Tuesday closed up +7 ticks.  The 10-year T-note yield fell -0.9 bp to 4.600%.  T-notes prices Tuesday recovered from early losses and moved moderately higher after the US Apr S&P manufacturing PMI report unexpectedly contracted, a dovish factor for Fed policy.  T-notes initially opened lower on Tuesday due to stronger stocks. Also, supply pressures were negative for T-note prices as the Treasury auctioned $69 billion of 2-year T-notes Tuesday as part of this week’s $183 billion of T-note auctions.

Demand for the Treasury’s $69 billion 2-year T-note auction was close to average and was neutral for T-note prices.  The bid-to-cover ratio for the auction was 2.66, slightly below the 10-auction average of 2.69.

European government bond yields Tuesday moved higher.  The 10-year German bund yield rose +1.6 bp to 2.502%.  The 10-year UK gilt yield rose +3.6 bp to 4.241%.

The Eurozone Apr S&P manufacturing PMI unexpectedly fell -0.5 to 45.6, weaker than expectations of an increase to 46.5.  However, the Apr composite PMI rose +1.1 to 51.4, stronger than expectations of 50.7 and the strongest pace of expansion in 11 months.

ECB Vice President de Guindos said, "If things move in the same direction as they have in recent weeks, the ECB will loosen its restrictive monetary policy stance in June.”

ECB Governing Council member and Bundesbank President Nagel said, "If the favorable inflation outlook from March is confirmed in the June forecast and the incoming data supports the forecast, the ECB can consider lowering interest rates."

US Stock Movers

Globe Life (GL) closed up more than +14% to lead gainers in the S&P 500 after raising its full-year operating EPS estimate to $11.50-$12.00 from a previous estimate of $11.30-$11.80.

General Electric (GE) closed up more than +8% after raising its GE Aerospace full-year operating profit estimate to $6.2 billion-$6.6 billion from a previous estimate of $6.0 billion-$6.5 billion. 

Danaher (DHR) closed up more than +7% after reporting Q1 sales of $5.80 billion, stronger than the consensus of $5.62 billion. 

MongoDB (MDB) closed up more than +7% to lead gainers in the Nasdaq 100 after Loop Capital Markets rated the stock a new buy with a price target of $415.

Kimberly-Clark (KMB) closed up more than +5% after reporting Q1 net sales of $5.15 billion, above the consensus of $5.08 billion, and raised its full-year organic set sales growth forecast to mid-single digits versus previous expectations of low-to mid-single-digit growth. 

Fiserv (FISV) closed up more than +4% after reporting Q1 adjusted EPS of $1.88, better than the consensus of $1.79. 

General Motors (GM) closed up more than +4% after reporting Q1 adjusted EPS of $2.62, stronger than the consensus of $2.12, and raising its full-year adjusted EPS estimate to $9.00-$10.00 from a previous estimate of $8.50-$9.50.

PulteGroup (PHM) closed up more than +4% after reporting Q1 revenue of $3.95 billion, better than the consensus of $3.60 billion. 

Hibbett (HIBB) closed up more than +18% after JD Sports agreed to buy the company for about $1.1 billion, or about $87.50 per share.

LKQ Corp (LKQ) closed down more than -14% to lead losers in the S&P 500 after reporting Q1 revenue of $3.70 billion, below the consensus of $3.76 billion.

MSCI Inc (MSCI) closed down more than -13% after reporting Q1 operating revenue of $680.0 million, below the consensus of $685.2 million. 

Nucor (NUE) closed down more than -8% after reporting Q1 EPS of $3.46, below the consensus of $3.60.

PepsiCo (PEP) closed down more than -2% to lead losers in the Nasdaq 100 after forecasting full-year organic revenue up +4.00%, weaker than the consensus of +4.17%.

Invesco Ltd (IVZ) closed down more than -5% after reporting Q1 adjusted net revenue of $1.05 billion, weaker than the consensus of $1.08 billion.

WR Berkley (WRB) closed down more than -5% after reporting investment fund losses of -$29 million in Q1 and said it didn’t repurchase any shares during the quarter. 

Packaging Corp of America (PKG) closed down more than -4% after reporting Q1 Ebitda excluding items of $333.2 million, weaker than the consensus of $345.2 million.

Sherwin-Williams (SHW) closed down more than -2% after reporting Q1 adjusted EPS of $2.17, weaker than the consensus of $2.2, and forecasting full-year adjusted EPS of $10.85-$11.35, below the consensus of $11.45. 

Cleveland-Cliffs (CLF) closed down more than -11% after reporting Q1 revenue of $5.20 billion, weaker than the consensus of $5.32 billion.

Earnings Reports (4/24/2024)

Align Technology Inc (ALGN), Amphenol Corp (APH), AT&T Inc (T), Avery Dennison Corp (AVY), Biogen Inc (BIIB), Boeing Co/The (BA), Boston Scientific Corp (BSX), Bunge Global SA (BG), Chipotle Mexican Grill Inc (CMG), CME Group Inc (CME), Entergy Corp (ETR), Ford Motor Co (F), Fortive Corp (FTV), General Dynamics Corp (GD), Hasbro Inc (HAS), Hilton Worldwide Holdings Inc (HLT), Humana Inc (HUM), International Business Machine (IBM), Interpublic Group of Cos Inc/T (IPG), Lam Research Corp (LRCX), Masco Corp (MAS), Meta Platforms Inc (META), Molina Healthcare Inc (MOH), Norfolk Southern Corp (NSC), Old Dominion Freight Line Inc (ODFL), O'Reilly Automotive Inc (ORLY), Otis Worldwide Corp (OTIS), Raymond James Financial Inc (RJF), Rollins Inc (ROL), ServiceNow Inc (NOW), Synchrony Financial (SYF), TE Connectivity Ltd (TEL), Teledyne Technologies Inc (TDY), Teradyne Inc (TER), Thermo Fisher Scientific Inc (TMO), Tyler Technologies Inc (TYL), United Rentals Inc (URI), Universal Health Services Inc (UHS), Waste Management Inc (WM), 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.