Markets Today: Stocks Under Pressure as Alphabet Earnings Disappoint

Morning Markets

December E-Mini S&P 500 futures (ESZ23) are down -0.28%, and the Dec Nasdaq 100 E-Mini futures (NQZ23) are down -0.53%.

Stock index futures this morning are moderately lower on some disappointing technology earnings results. Alphabet is down more than -6% in pre-market trading after reporting weaker-than-expected cloud profit.  Also, Texas Instruments is down more than -5% after reporting Q3 revenue below consensus and forecasting weaker-than-expected Q4 revenue.  On the positive side, Microsoft is up more than +1% in pre-market trading after reporting stronger-than-expected quarterly revenue. 

In the Middle East, Qatar’s foreign minister said talks to release hostages held by Hamas are progressing well, and there may be a breakthrough soon. Diplomatic efforts to prevent the Israeli-Hamas conflict from spreading in the Middle East have intensified in recent days, with French President Macron due in Egypt today and more European leaders visiting Israel. 

Israel said it supports diplomatic efforts to get Hamas to release hostages from Gaza, a move that could delay a possible ground invasion, although Israel said it wouldn’t wait long to start its ground assault.  Iran and its proxy forces in Lebanon, Iraq, and Yemen have warned they could retaliate against Israel if Israeli troops enter Gaza. 

U.S. weekly MBA mortgage applications fell -1.0% in the week ended Oct 20.  The home purchase mortgage sub-index fell -2.2% to its lowest level in 28 years, and the refinancing mortgage sub-index rose +1.8%.  The average 30-year fixed rate mortgage rose +20 bp to 7.90%, the highest in 23 years.

The markets are discounting a 2% chance that the FOMC will raise the funds rate by +25 bp at the next FOMC meeting that ends on November 1, and a 27% chance for that +25 bp rate hike at the following meeting that ends on December 13.  The markets are then expecting the FOMC to begin cutting rates in the second half of 2024 in response to an expected slowdown in the U.S. economy.

U.S. and European bond yields are lower.  The 10-year T-note yield is up +5.7 bp at 4.880%.  The 10-year German bund yield is up +3.1 bp at 2.859%.  The 10-year UK gilt yield is up +2.3 bp at 4.563%.  

Overseas stock markets are higher.  The Euro Stoxx 50 is up +0.20%.  China’s Shanghai Composite Index closed up +0.40%.  Japan’s Nikkei 225 today closed up +0.67%.

The Euro Stoxx 50 today recovered from early losses and is moderately higher on strength in bank stocks.  Deutsche Bank AG jumped more than +7% to lead European bank stocks higher after it said it plans to accelerate payouts to shareholders as higher income from its corporate bank and deposit inflows offset weaker trading results in Q3. 

The Euro Stoxx 50 initially moved lower today on some disappointing corporate earnings results.  European luxury goods makers were under pressure, with Gucci owner Kering SA down more than -3% after reporting a larger-than-expected decline in Q3 revenue and sales.  Also, consumer products makers were in retreat, led by a decline of more than -2% in Reckitt Benckiser Group Plc after Q3 sales rose less than expected.  In addition, merchant services companies tumbled, led by a more than -50% plunge in Worldline after the French payments company cut its outlook for this year and scrapped its revenue growth target for next year.

The Eurozone Sep M3 money supply fell -1.2% y/y, a smaller decline than expectations of -1.8% y/y.

The German Oct IFO business climate index rose +1.1 to 86.9, stronger than expectations of 86.0.

China’s Shanghai Composite Stock Index today closed moderately higher.  Efforts by the Chinese government to boost economic growth underpinned stock prices today.  The Xinhua News Agency reported that the government approved a plan to raise the fiscal deficit ratio for 2023 to about 3.8% of GDP, above the 3% target the government set back in March. The plan includes issuing additional sovereign debt worth 1 trillion yuan ($137 billion) in Q4 to support disaster relief and construction.  Gains in the overall market were limited by weakness in property stocks after Chinese developer Country Garden Holdings was deemed to be in default on a dollar bond for the first time after failure to pay interest on the note within a grace period that ended last week. 

Japan’s Nikkei Stock Index today posted moderate gains.  Japanese stocks related to China's consumer and manufacturing demand rose today after the Chinese government stepped up efforts to boost domestic growth.  Also, Japanese technology stocks rose after Microsoft announced a strong sales increase in its fiscal first quarter.  In addition, a Japanese lawmaker said Japan is aiming to secure an additional 1.49 trillion yen ($10 billion) in subsidies for two semiconductor projects:  900 billion yen would be set aside for a second Taiwan Semiconductor Manufacturing factory in Kumamoto, while 590 billion yen would be used for Japan’s homegrown chip venture Rapidus Corp.

The Japan Aug leading index CI was revised downward by -0.3 to 109.2 from the initially reported 109.5.

Pre-Market U.S. Stock Movers

Alphabet (GOOGL) tumbled more than -6% in pre-market trading after reporting Q3 cloud revenue of $8.41 billion, weaker than the consensus of $8.60 billion. 

Texas Instruments (TXN) dropped more than -5% in pre-market trading after reporting Q3 revenue of $4.53 billion, below the consensus of $4.55 billion, and forecasting Q4 revenue of $3.93 billion-$4.27 billion, weaker than the consensus of $4.49 billion. 

CoStar Group (CSGP) sank more than -9% in pre-market trading after reporting Q3 revenue of $624.7 million, below the consensus of $626 million, and forecasting Q4 revenue of $630 million-$635 million, weaker than the consensus of $644 million. 

Teladoc Health (TDOC) tumbled more than -7% in pre-market trading after reporting Q3 revenue of $660.2 million, weaker than the consensus of $664.3 million, and cutting its full-year revenue forecast to $2.60 billion-$2.63 billion from a prior estimate of $2.60 billion-$2.68 billion, below the consensus of $2.63 billion.   

Affirm Holdings (AFRM) fell more than -3% in pre-market trading after Compass Point Research & Trading LLC downgraded to sell from neutral with a price target of $13. 

Albemarle (ALB) dropped more than -2% in pre-market trading after Piper Sandler downgraded the stock to neutral from overweight. 

Etsy (ETSY) fell more than -2% in pre-market trading after Citigroup downgraded the stock to neutral from buy.

Thermo Fisher (TMO) slid more than -1% in pre-market trading after reporting Q3 revenue of $10.57 billion, weaker than the consensus of $10.64 billion, and cutting its full-year revenue forecast to $42.7 billion from a prior forecast of $43.4 billion-$44 billion, below the consensus of $43.54 billion. 

Microsoft (MSFT) rose more than +1% in pre-market trading after reporting Q1 revenue of $56.52 billion, well above the consensus of $54.54 billion.

Boeing (BA) rallied more than +3% in pre-market trading after reiterating full-year adjusted free cash flow of $3 billion-$5 billion, stronger than the consensus of $3.53 billion.

Chewy Inc (CHWY) climbed more than +2% in pre-market trading after UBS upgraded the stock to neutral from sell. 

Vertiv Holdings (VRT) rose more than +2% in pre-market trading after reporting Q3 adjusted EPS of 52 cents, better than the consensus of 44 cents, and raising its full-year adjusted EPS estimate to $1.69-$1.73 from a prior forecast of $1.54-$1.64. 

The Gap (GPS) climbed more than +3% in pre-market trading after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $16. 

Veeva Systems (VEEV) rose more than +2% in pre-market trading after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $229. 

Earnings Reports (10/25/2023)

Align Technology Inc (ALGN), Ameriprise Financial Inc (AMP), Amphenol Corp (APH), Automatic Data Processing Inc ADP), AvalonBay Communities Inc (AVB), Avery Dennison Corp (AVY), Baker Hughes Co (BKR), Boeing Co/The (BA), CME Group Inc (CME), Edwards Lifesciences Corp (EW), EQT Corp (EQT), Equinix Inc (EQIX), Everest Group Ltd (EG), Fortive Corp (FTV), General Dynamics Corp (GD), Globe Life Inc (GL), Hess Corp (HES), Hilton Worldwide Holdings Inc (HLT), IDEX Corp (IEX), International Business Machine (IBM), Invitation Homes Inc (INVH), KLA Corp (KLAC), MarketAxess Holdings Inc (MKTX), Meta Platforms Inc (META), Mid-America Apartment Community (MAA), Molina Healthcare Inc (MOH), Moody's Corp (MCO), 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), Roper Technologies Inc (ROP), ServiceNow Inc (NOW), Teledyne Technologies Inc (TDY), Teradyne Inc (TER), Thermo Fisher Scientific Inc (TMO), T-Mobile US Inc (TMUS), United Rentals Inc (URI), Universal Health Services Inc (UHS), Veralto Corp (VLTO), VICI Properties Inc (VICI), Westinghouse Air Brake Technol (WAB), Whirlpool Corp (WHR).

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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.