October 23, 2024

Even though the main stock indexes ended with very small changes at the end of the session yesterday, there was plenty going on within the indices themselves.  

‍

For instance, the Dow had been ahead by more than 100 points just after 2pm but then collapsed at the end of the session to close with a 7 point decline to 42,924 and this took place was MCD got blasted lower due to reports of E-coli contamination in its quarter-pound meals which have been so widely promoted lately, and this has taken place mainly in the midwestern part of the U.S.  

‍

In addition, selling in CAT, CRM, HD, 3M on earnings, V and VZ also did not help.  

‍

The S&P eased back to a 3 point decline to 5851 on some selling in AAPL, TSLA as usual ahead of its earnings report tonight and NFLX after its run to record highs. For what it is worth, this was the second consecutive decline here for the first time in a month and a half.  

‍

And sure enough the Nasdaq once again ended positive by 33 points to 18,573 led by AMZN, META and BKNG while mighty NVDA ended just about unchanged.  

‍

The Russell 2000 Index of small stocks fell by 8 to 2231 on weak local bank selling and the VIX actually ended slightly lower at 18.20 despite the so-far futile attempts of some participants to take bearish positions by buying way out of the money calls on the anticipation that Middle Eastern difficulties will cause it to go higher.  

‍

As mentioned above, there were large moves in both directions mainly based on earnings, as for instance GM gained 10% its best day since 2020 after delivering better profit and revenue for the latest quarter and it also benefited from stronger sales to individual U.S. customers, even as sales slowed to large fleet buyers.  

‍

PM was another one of the strongest forces pushing upward on the S&P and rallied 10% after topping forecasts for both profit and revenue. Its CEO said the company is seeing momentum across regions and business lines, including growth for both its smoke-free business and for its combustible cigarettes.  

‍

NSC gained 5% after the railroad topped profit forecasts.  

‍

Keeping indexes in check was GE which lost 9% and this was the heaviest weight on the S&P. The company, which started to trade independently this spring after splitting off from the former conglomerate General Electric, reported stronger profit for the latest quarter than analysts expected, but its revenue fell short of forecasts.  

‍

Dow component VZ sank 5% after likewise reporting weaker revenue for the latest quarter than expected, even though its profit edged past forecasts.  

‍

GPC, which sells automotive and industrial replacement parts, dropped by a large 21% for the biggest loss in the S&P after its profit for the latest quarter fell well short of expectations. Its CEO said much of the shortfall was due to continued weakness in Europe and its industrial business.  

‍

SHW sank 5% after both its profit and revenue came in weaker than analysts expected. Its CEO cited a “tough macroeconomic environment” and “continued choppiness in the demand environment” for its paints and coatings. Demand from do-it-yourself customers in North America remains weak given the higher debt levels that they are carrying and still-lingering inflation.

Stocks have slowed their record-breaking momentum this week under increasing pressure from rising Treasury yields in the bond market.  

‍

The yield on the 10-year Treasury held steady at 4.20%, where it was late Monday. That is well above the 4.08% level it was at just on Friday. Higher yields for Treasurys can make investors less willing to pay high prices for stocks, which critics say already look too expensive.  

‍

Treasury yields have been climbing following a raft of reports showing that the economy remains stronger than expected which is good news for the markets because it bolsters hopes that the economy can escape from the worst inflation in generations without the painful recession that many had worried was inevitable.  

‍

But it also is forcing traders to ratchet back expectations for how much the Federal Reserve will further cut interest rates as the central bank has made the drastic shift to lowering interest rates in hopes of keeping the economy strong, but a more resilient-than-expected economy would not need as much help.  

‍

Traders are now largely expecting the Fed to cut its main interest rate by half a percentage point more through the end of the year, according to data from CME Group. A month ago, some of those same traders were betting on the federal funds rate ending the year as much as half a percentage point lower than that.  

‍

In stock markets abroad, European indexes were modestly lower despite German software giant SAP nudging past profit expectations. In Asia, Japan’s Nikkei 225 dropped 1.4%, and South Korea’s Kospi fell 1.3%, but indexes were more resilient in China.  

‍

The Third-quarter earnings season continues to roll along this week with the following: yesterday: – SAP, ZION, GM, PM higher and Dow components 3M and VZ plus NUE, GPC, MCO, SHW lower; today – CME, GD and Dow components BA and KO all lower and T, TXN are higher; tonight – TSLA; Thursday – AA, DOW, HOG, LUV, VLO, UNP, UPS; Friday – AN.  

‍

Economic reports will see: yesterday - September L.E.I. declined by 0.5%; today - September existing home sales; Thursday – September new home sales, weekly jobless claims; Friday – September durable goods orders, final October U. of Michigan Consumer Sentiment Survey.