Stocks Settle Mixed as Early Gains Fade on Mixed Corporate News

The S&P 500 Index ($SPX) (SPY) Friday closed down by -0.03%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down by -0.61%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up by +0.59%.

Stocks on Friday settled mixed, with the Dow Jones Industrials falling to a 2-week low and the Nasdaq 100 climbing to a 3-1/4 month high.  An early rally in stocks Friday faded on mixed corporate news.  Western Digital closed up more than +4% to lead chip stocks higher after reporting stronger-than-expected Q1 adjusted EPS. Also, Centene closed up more than +4% after reporting Q3 revenue well above the consensus and raising its full-year revenue forecast.  In addition, Booz Allen Hamilton closed up more than +9% after reporting better-than-expected Q2 adjusted EPS and raising its full-year adjusted EPS estimate.

However, the Dow Jones Industrials turned negative after McDonalds fell nearly -3% after the CDC said the E. Coli outbreak linked to McDonald’s burgers spread to 13 states and infected 75 people.  Also, the S&P 50 gave up its gains as Mohawk Industries closed down more than -13% after forecasting Q4 adjusted EPS well below consensus.  In addition, HCA Healthcare closed down more than -8% after reporting a weaker-than-expected Q3 EPS.

The 10-year T-note yield on Friday moved higher by +2.8 bp to 4.240% and weighed on stocks on better-than-expected US economic news.   Sep capital goods new orders nondefense ex-aircraft and parts, a proxy for capital spending, rose +0.5% m/m, stronger than expectations of +0.1% m/m.  Also, the University of Michigan US Oct consumer sentiment index was revised upward by +1.6 to a 6-month high of 70.5, stronger than expectations of 69.0.

Corporate Q3 earnings season is in full gear.  More than 120 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 have reported earnings this week.  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.  The US signaled to Saudi Arabia it was ready to help defend the kingdom in the event of an escalation of the Middle East conflict.  Also, the New York Times reported Friday that Iran has ordered its armed forces to be prepared for war.  The markets are also awaiting Israel’s response to the October 1 missile barrage from Iran.

The markets are discounting the chances at 95% 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 by +0.15%.  China's Shanghai Composite closed up by +0.59%.   Japan's Nikkei Stock 225 closed down by -0.60%.

Interest Rates

December 10-year T-notes (ZNZ24) Friday closed down by -7 ticks.  The 10-year T-note yield rose by +2.8 bp at 4.240%. Dec T-notes Friday gave up an early advance and moved lower on stronger-than-expected US economic news.  Sep capital goods new orders nondefense ex-aircraft, a proxy for capital spending, rose more than expected, and the University of Michigan US Oct consumer sentiment index was revised upward to a 6-month high.  T-notes Friday initially moved higher on a decline in inflation expectations after the 10-year breakeven inflation expectations rate fell to a 1-week low of 2.269%. 

European government bond yields on Friday were mixed.  The 10-year German bund yield rose by +2.5 bp to 2.291%.  The 10-year UK gilt yield fell by -0.4 bp to 4.233%.

Eurozone Sep M3 money supply rose +3.2% y/y, stronger than expectations of +2.9% y/y and the highest pace in 1-3/4 years.

The Eurozone Sep ECB 1-year inflation expectations eased to a 3-year low of +2.4% from +2.7% in Aug, better than expectations of +2.6%.  The Sep 3-year inflation expectations eased to a 3-year low of +2.1% from +2.3% in Aug, better than expectations of +2.2%. 

The German Oct IFO business climate rose +1.1 to 86.5, stronger than expectations of 85.6.

ECB Governing Council member Simkus said, "As I read the data, I don't see a case for a 50 bp rate cut" from the ECB.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 100% for the December 12 policy meeting and a 41% chance of a -50 bp rate cut at the same meeting.

US Stock Movers

Western Digital (WDC) closed up more than +4% to lead chip stocks higher after reporting Q1 adjusted EPS of $1.78, stronger than the consensus of $1.72.  Also, GlobalFoundries (GFS) closed up more than +3% to lead gainers in the Nasdaq 100, and Intel (INTC) closed up more than +1% to lead gainers in the Dow Jones Industrials.  Also, Lam Research (LRCX), ARM Holdings Plc (ARM), NXP Semiconductors NV (NXPI), Advanced Micro Devices (AMD), KLA Corp (KLAC), ON Semiconductor (ON), Applied Materials (AMAT), and Qualcomm (QCOM) closed up more than +1%.

Tapestry (TPR) closed up more than +13% to lead gainers in the S&P 500 after a federal judge blocked Tapestry's $8.5 billion acquisition of Capri Holdings.   

Deckers Outdoor (DECK) closed up more than +10% after reporting Q2 net sales of $1.31 billion, better than the consensus of $1.20 billion. 

Digital Realty Trust (DLR) closed up more than +9% after raising its full-year adjusted Ebitda to $2.93 billion-$2.98 billion from a previous forecast of $2.80 billion-$2.90 billion.

Booz Allen Hamilton Holding (BAH) closed up more than +9% after reporting Q2 adjusted EPS of $1.81, well above the consensus of $1.47, and raised its full-year adjusted EPS estimate to $6.10-$6.30 from a previous forecast of $5.80-$6.05.   

Capital One Financial (COF) closed up more than +5% after reporting Q3 adjusted EPS of $4.51, well above the consensus of $3.77. 

Centene (CNC) closed up more than +4% after reporting Q3 revenue of $42.02 billion, well above the consensus of $38.12 billion, and raised its full-year revenue forecast to $159 billion-$161 billion from a previous forecast of $155 billion-$157 billion, stronger than the consensus of $156.67 billion.

Summit Materials (SUM) closed up more than +4% after Bloomberg reported that Quikrete Holdings approached the company about a potential takeover.   

Mohawk Industries (MHK) is down more than -10% to lead losers in the S&P 500 after forecasting Q4 adjusted EPS of $1.77-$1.87, well below the consensus of $2.24.

McDonald’s (MCD) closed down almost -3% to lead losers in the Dow Jones Industrials after the CDC said that the E. Coli outbreak linked to McDonald’s burgers has now spread to 13 states and infected 75 people. 

HCA Healthcare (HCA) closed down more than -8% after reporting Q3 EPS of $4.88, below the consensus of $5.01.

New York Community Bancorp (NYCB) closed down more than -8% after reporting Q3 provision for credit losses of $242 million, well above the consensus of $160.3 million. 

Olin Corp (OLN) closed down more than -7% after reporting an unexpected Q3 EPS loss of -21 cents versus expectations of +2.3 cents, citing worse-than-expected damage from Hurricane Beryl. 

AutoNation (AN) closed down more than -4% after reporting Q3 adjusted EPS of $4.02.  weaker than the consensus of $4.38. 

Dexcom (DXCM) closed down more than -1% after reporting Q3 US revenue of $701.9 million, below the consensus of $726.9 million.

Capri Holdings (CPRI) closed down more than -48% after a federal judge blocked Tapestry's $8.5 billion acquisition of the company.   

Earnings Reports (10/28/2024)

Brown & Brown Inc (BRO), Cadence Design Systems Inc (CDNS), CenterPoint Energy Inc (CNP), F5 Inc (FFIV), Ford Motor Co (F), ON Semiconductor Corp (ON), Regency Centers Corp (REG), SBA Communications Corp (SBAC), Waste Management Inc (WM), Welltower Inc (WELL).

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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.