October 18, 2024

Ho, hum – once again the market was generally able to improve off of its worst early levels yesterday and as a result, the Dow ended at another record high with a 161 point gain to 43,239 led by advances in AXP, TRV on a strong earnings report and CVX on a rebound from recent selling.

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The S&P drifted around mainly to the slightly positive side before slipping late to a 1 point closing decline down to 5841. It was helped by gains in NVDA which did fail over the prior high of 140, AAPL, AVGO, MU, TSMC reached a new high after good earnings and even ASML was able to pick itself off of the floor for a slight gain. On the other hand, there were earnings-related declines in ELV and CSX which hurt the upside.

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The Nasdaq gained 6 points to 18,375 helped by the gains just mentioned while the Russell 2000 Index of small stocks lost a few points to 22.80. Meanwhile the VIX went lower to 19.11 despite the ongoing attempt of some participants to keep getting involved in extremely high calls which do not seem to have a chance of being reached, both for next Wednesday and then in the middle of November.

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Companies in the chip industry were some of the market’s strongest after global heavyweight TSMC reported a bigger profit for the latest quarter than analysts expected. TSMC credited strong demand related to smartphones and artificial intelligence, and its stock that trades in the United States jumped by 10%.

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It was a sharp turnaround from earlier in the week when a warnings from a major Dutch supplier, ASML sent stocks sinking across the industry. NVDA’s of 0.9% was Thursday’s strongest single force pushing upward on the S&P.

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But a 1.4% slide for Google’s parent company, Alphabet, and a 10.6% tumble for ELV helped keep stock indexes in check.

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In the bond market, Treasury yields rose following the latest encouraging reports on the U.S. economy.

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Retailers made more in September gains of 0.4% and 0.5% excluding autos than in August, and underlying growth trends within the data were better than economists expected. The strength was all the more impressive in the face of stretched household finances, particularly among lower-income shoppers, and pre-election jitters.

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Weekly jobless claims fell a bit to 241,000, which was a signal that layoffs nationwide are relatively low and aren’t damaging the job market.

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Such data bolster the hope that has sent U.S. stocks to records: The economy could make an escape from the worst inflation in generations, one that ends without a recession that many investors had seen as nearly inevitable. And with the Federal Reserve now cutting interest rates to keep the economy humming, the expectation among optimists is that stocks can rise even further.

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Critics, meanwhile, warn stock prices look too expensive given how much faster they have climbed than profits for companies.

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Lower interest rates can ease the brakes off the economy, boost prices for investments and make borrowing bills less costly for households and businesses. And rates are heading lower around the world, with only a couple exceptions.

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The European Central Bank on Thursday cut its main interest rate by a quarter of a percentage point. That helped send stock indexes higher by 1.2% in France and 0.8% in Germany. They halted a run of losses that started the day in Asian stock markets, where Japan’s Nikkei 225 fell 0.7% and Hong Kong’s Hang Seng dropped 1%.

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TRV was the biggest reason for the Dow’s setting another record. It jumped 9% after reporting stronger profit and revenue for the latest quarter than analysts expected. Higher income made from its investments and elsewhere helped cover greater losses due to Hurricane Helene and severe wind and hailstorms in multiple states.

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BX also pushed upward on indexes after the investor in real estate, hedge funds and other alternative investments reported stronger profit than expected. It climbed 6.3% after their CEO said it is seeing broad-based acceleration across its businesses.

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They helped offset ELV’s tumble after it reported weaker profit for the latest quarter as the insurer also cut its forecast for profit for the full year, saying it was dealing with a “timing mismatch” between Medicaid rates and higher claims from customers.

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CSX fell 6.7% after also falling short of profit expectations for the latest quarter. The railroad also expects only modest volume growth the rest of the year as the Southeast rebuilds after two major hurricanes.

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In the bond market, the yield on the 10-year Treasury rose to 4.09% from 4.02% late Wednesday. The two-year Treasury yield, which moves more closely with expectations for action by the Fed, rose to 3.98% from 3.94%.

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All the strong recent reports on the U.S. economy have forced traders to abandon bets that the Fed could cut its main interest rate by another half a percentage point in November. Instead, they are now largely betting the Fed will move forward with a traditional-sized cut of a quarter of a percentage point, according to data from CME Group.

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That shift in expectations has helped push Treasury yields higher.

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This week starts the main part of 3Q earnings results with the following lineup: yesterday - Dow component TRV higher in addition to TWSC, BX, while ELV and CSX were lower; today – Dow components AXP and PG are lower, in addition to CVS while ISRG is higher.

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Economic reports will see: yesterday - September retail sales were ahead by 0.4% and ex-autos gained 0.5%’ weekly jobless claims came in at 241,000, October Philly Fed Index gained 10.3, September industrial production; today – September housing starts.