Market Update
With Earnings In Focus, U.S. Market Indexes Closed Higher
Barry Adams
24 Oct, 2023
New York City
Investors bid up stocks after Treasury yields stabilized and positive earnings reports bolstered market sentiment.
Market sentiment improved after Verizon, Coca-Cola, and General Electric reported better-than-expected earnings, and after the bell, investors awaited earnings from Microsoft and Alphabet.
However, analysts are cautioning that big tech stocks reflect euphoric valuations despite the recent decline in the last three months, and stock valuations leave little room for disappointment.
Benchmark indexes edged jumped as much as 1% on earnings optimism and hopes that bond yields may trend lower amid rising geopolitical tensions in the Middle East.
Investors are adjusting their expectations of U.S. economic growth, but the interest rate outlook remains uncertain.
The Federal Reserve began its aggressive rate hike campaign 18 months ago after keeping rates near zero for 15 years after policymakers were caught off-guard following pandemic-era supply chain disruptions coupled with the Fed's rapid expansion of its balance sheet by $4 trillion.
Moreover, despite the end of pandemic-era supply chain disruptions, the Federal Reserve is supporting the surge in the annual budget deficit, which reached $1.7 trillion in the fiscal year 2023 ending in September.
Despite the multiple interest rate hikes, inflation has cooled but not dropped to the target rate of 2%, and the latest comments from Federal Reserve Chairman Powell suggest that policymakers are less likely to increase rates at the next meeting, but higher rates may be needed through 2024.
U.S. Indexes and Yields
The S&P 500 index increased 0.8% to 4,252.43, and the Nasdaq Composite rose 1.0% to 13,147.32.
The yield on 2-year Treasury notes increased to 5.09%, 10-year Treasury notes inched higher to 4.88%, and 30-year Treasury bonds edged up to 5.0%.
Crude oil decreased $1.55 to $83.93 a barrel, and natural gas prices edged up 7 cents to $2.99 a thermal unit.
The dollar index edged higher to 106.19, the level last seen in November 2022, and extended gains from the low of 99.85 on July 13, 2023.
U.S. Stock Movers
Coca-Cola Company jumped 2.8% to $55.63 after the beverage company reported stronger-than-expected third-quarter earnings and lifted its annual outlook as the company sold more cases of beverages.
General Motors Company rose 0.3% to $29.29 after the vehicle maker reported rising sales and earnings in the third quarter, but the automaker also pulled its annual earnings outlook, citing the ongoing United Auto Workers strike.
Revenue in the third quarter increased 5.4% to $41.89 billion, net income edged lower to $3.06 billion from $3.31 billion, and diluted earnings per share eased to $2.20 from $2.25 a year ago.
The company also withdrew its previously issued adjusted annual earnings outlook between $12 billion and $14 billion and net income attributable to shareholders between $9.3 billion and $10.7 billion.
Tesla Inc. rose 1.8% to $215.91, and the company said in a regulatory filing that it is facing several investigations from the Department of Justice covering a range of electric vehicles, "personal benefits and related parties and personnel decisions," and other issues involving its operations.
RTX Corp. soared 5.9% to $77.48 after the aerospace company reported better-than-expected revenue and earnings in its latest quarterly results.
Spotify Technology SA jumped 7.2% to $165.10 after the audio streaming company reported third-quarter revenue that met investors' expectations, and the company said monthly active subscribers are expected to top 600 million in the fourth quarter.
European Markets Closed Up and Bond Yields Edged Lower
European markets turned higher after bond yields edged lower as investors reviewed regional economic data.
Benchmark indexes in Paris and Frankfurt advanced, but indexes in London lacked direction.
The Eurozone output contracted the most in nearly three years, according to the latest data compiled by S&P.
The HCOB Eurozone Composite PMI fell to 46.5 in October from 47.2 in September, the fifth monthly decline in a row in business activities.
Activities in both the manufacturing and service sectors declined, and the fall in activities was the steepest since November 2020 and sharpest since March 2013, when pandemic-era disruptions were excluded.
New orders declined the most since May 2020, and backlogs of orders eased at the fastest pace since June 2020.
Separate reports showed a mixed economic picture in the UK and Germany.
German consumer confidence declined for a third month in a row in November, and the UK's private sector activity contracted for the third month in a row, and the adjusted jobless rate edged up.
The adjusted unemployment rate for the three months to August increased to 4.2%, following a 4.0% rate in the previous three months ending in May, the Office for National Statistics reported Tuesday.
The adjusted employment rate decreased by 0.3 percentage points to 75.7%, and economic inactivity edged up 0.1 percentage point to 20.9%, as the report highlighted.
Last week, the statistical agency reported that the average earnings growth in the three months to August in the UK eased slightly to 8.1% from 8.5% in the previous period, but the increase was still one of the largest gains since record-keeping began in 2001.
Europe Indexes and Yields
The DAX index increased 0.5% to 14,879.94, the CAC-40 index rose 0.6% to 6,893.65, and the FTSE 100 index added 0.2% to 7,389.70.
The yield on 10-yetrar German bonds decreased to 2.81%, French bonds traded lower to 3.43%, the UK gilts edged down to 4.56%, and Italian bonds eased to 4.81%.
The euro hovered near a three-month low at $1.06, the British pound at $1.22, and the U.S. dollar at 89.34 Swiss cents.
Brent crude decreased $1.80 to $88.02 a barrel, and the Dutch TTF natural gas edged higher by €2.02 to €49.26 per MWh.
Europe Stock Movers
UniCredit SpA increased 1.3% to €22.99, and the Italian bank reported third-quarter earnings that were ahead of market expectations.
Logitech International SA increased 7.7% to CHF 66.22 after the Swiss computer accessories maker revised higher its annual outlook.
Anglo American, Glencore, and Antofagasta advanced between 0.6% and 0.9% after the U.S. dollar weakened and base metal prices edged higher.
Barclays Plc declined 6.5% to 135.22 pence after the U.K.-based lender warned that the financial services provider is facing margin pressures, and the bank said it plans to accelerate its plan to cut costs later in the year.
Lloyds Banking Group declined 1.9% to 40.66 pence, and NatWest Group Plc dropped 2.2% to 210.20 pence.
Puma SE soared 3.8% to €52.76 after the German sportswear maker reiterated its full-year outlook.
Hermes International SCA advanced 2.3% to €1,720.60 after the luxury goods maker reported third-quarter sales that were ahead of the market's expectations.
Bunzl Plc fell 3.8% to 2,802.0 pence after the distribution services provider said third-quarter revenue declined 4.8% at constant currency exchange rates.
"We reiterate our confidence in the group’s 2023 adjusted operating profit being moderately higher than in 2022 at constant exchange rates.
We expect Group revenue, at constant exchange rates, to be slightly lower than in 2022, with the benefit of announced acquisitions offset by some organic decline, following strong organic growth in recent years, and a small impact from UK healthcare disposal.
The operating margin in 2023 is now expected to reach the record level seen in recent years," the company said in an update to investors released Tuesday.
U.S. Movers: Coca-Cola, Corning, General Electric, General Motors, Halliburton, Mueller Industries, PacWest Bancorp, NVR, RTX, Spotify, Tesla
Scott Peters
24 Oct, 2023
New York City
Benchmark indexes advanced after positive earnings, and stable Treasury yields supported a rebound in market indexes for the second day in a row.
The S&P 500 index increased 0.7% to 4,245.11, and the Nasdaq Composite rose 0.8% to 13,120.29.
The yield on 2-year Treasury notes increased to 5.09%, 10-year Treasury notes inched higher to 4.88%, and 30-year Treasury bonds edged up to 5.0%.
The Coca-Cola Company jumped 2.8% to $55.63 after the beverage company reported stronger-than-expected third-quarter earnings and lifted its annual outlook as the company sold more cases of beverages.
Revenue in the third quarter increased 8% to $11.95 billion from $11.1 billion, net income advanced 9% to $3.1 billion from $2.8 billion, and diluted earnings per share rose to 71 cents from 65 cents a year ago.
Unit case volume increased 2% from a year ago, and price and product mix jumped 9%, driving comparable sales by 8% in the quarter.
General Electric Company increased 7.4% to $114.47 after the engineering and healthcare company reported stronger-than-expected third quarter earnings.
Revenue in the third quarter rose 20% to $17.4 billion from $14.5 billion, driven primarily by increases in the aerospace and renewable energy segments.
GE Aerospace orders rose 34% and revenue jumped 25%, led by commercial engines and services, and defense orders rose 8%.
Renewable energy segment revenue rose 14%, driving revenue growth at GE Vernova.
Net income attributable to shareholders increased to $258 million from $88 million, and diluted earnings per share rose to 24 cents from 8 cents a year ago.
General Electric is set to trade as two independent companies, GE Aerospace and GE Vernova, in the second quarter of 2024.
General Motors Company rose 0.3% to $29.29 after the vehicle maker reported rising sales and earnings in the third quarter, but the automaker also pulled its annual earnings outlook, citing the ongoing United Auto Workers strike.
Revenue in the third quarter increased 5.4% to $41.89 billion, net income edged lower to $3.06 billion from $3.31 billion, and diluted earnings per share eased to $2.20 from $2.25 a year ago.
The company also withdrew its previously issued adjusted annual earnings outlook between $12 billion and $14 billion and net income attributable to shareholders between $9.3 billion and $10.7 billion.
Tesla Inc. rose 1.8% to $215.91, and the company said in a regulatory filing that it is facing several investigations from the Department of Justice covering a range of electric vehicles, "personal benefits and related parties and personnel decisions," and other issues involving its operations.
RTX Corp. soared 5.9% to $77.48 after the aerospace company reported better-than-expected revenue and earnings in its latest quarterly results.
Revenue in the third quarter declined 21% to $13.5 billion from $17 billion, and the company swung to a net loss of $984 million from a profit of $1.4 billion, and diluted earnings per share dropped to ($0.68) from 94 cents a year ago.
The backlog at the end of the third quarter was $190 billion, of which $115 billion was from commercial aerospace and $75 billion was from defense contracts.
The board of directors approved a $10 billion accelerated stock repurchase program scheduled to begin immediately, resulting in a post-merger shareholder return commitment of between $36 billion and $37 billion through 2025, up from the previous range of between $33 billion and $35 billion.
Spotify Technology SA jumped 7.2% to $165.10 after the audio streaming company reported third-quarter revenue that met investors' expectations, and the company said monthly active subscribers are expected to top 600 million in the fourth quarter.
Mueller Industries increased 2.2% to $35.85 after the company reported its latest quarterly results.
Revenue in the third quarter declined to $819.8 million from $944.8 million, reflecting lower demand in the wholesale channel as distributors worked through inventories of products used in residential construction.
Net income declined to $132.7 million from $154.5 million, and diluted earnings per share fell to $1.17 from $1.37 a year ago, reflecting a two-for-one stock split effective October 20.
NVR Inc. declined 2.6% to $5,362.0 after the home builder reported a decline in revenue in the third quarter.
Consolidated revenue declined 7% to $2.57 billion from $2.85 billion, net income rose to $432.2 million from $411.4 million, and diluted earnings per share advanced to $125.56 from $118.51 a year ago.
New home orders in the third quarter increased by 7% to 4,746 units from 4,421 units, and the average sales price of new orders increased by 1% to $456,100 a year ago.
The cancellation rate decreased to 14% in the third quarter from 15% a year ago.
The average home settlement price declined 3% to $448,000, and the backlog of homes sold but not settled dropped on a unit basis by 4% to 10,371 units and eased on a dollar basis by 6% to $4.8 billion from a year ago.
Halliburton Company fell 2.4% to $40.67 after the company reported strong quarter results driven by higher demand for oil drilling services.
Revenue in the third quarter increased to $5.8 billion from $5.3 billion, net income advanced to $724 million from $549 million, and diluted earnings per share rose to 79 cents from 60 cents a year ago.
Oil well completion and production revenue in the quarter was sequentially flat at $3.5 billion, and drilling and evaluation service revenue was sequentially flat at $2.3 billion.
North American revenue sequentially declined 3% to $2.6 billion, but international revenue sequentially rose 3% to $3.2 billion.
PacWest Bancorp declined 6.2% to $6.85 after the regional bank reported mixed quarterly results.
Total interest income increased to $446 million from $410 million, the company swung to a net loss of $33.3 million from a profit of $122 million, and diluted earnings per share dropped to ($0.28) from $1.02 a year ago.
Interest-bearing deposits increased 1% to 79%, or $26.6 billion, and cost-on-average deposits increased to 2.98% from 2.62% in the previous quarter, respectively.
At the end of the quarter, FDIC-insured deposits represented 81% of total deposits.
Total borrowings at the end of the quarter were $6.29 billion with a weighted average rate of 5.43%, reflecting $4.9 billion borrowed under the Bank Term Funding Program with a rate of 4.38%.
Securities held-for-sale declined to $4.48 billion from $5.89 billion, and securities held-to-maturity edged up to $2.28 billion from $2.26 billion a year ago.
S&P 500, Nasdaq Jump 1% On Strong Earnings and Stable Treasury Yields
Barry Adams
24 Oct, 2023
New York City
Stocks on Wall Street advanced after investors reviewed the latest batch of strong earnings, and Treasury yields hovered near 16-year highs.
Market sentiment improved in early trading after Verizon, Coca-Cola, and General Electric reported better-than-expected earnings.
Benchmark indexes edged more than 0.6% on earnings optimism and hopes that bond yields may trend lower amid rising geopolitical tensions in the Middle East.
Investors are adjusting their expectations of U.S. economic growth, but the interest rate outlook remains uncertain.
The Federal Reserve began its aggressive rate hike campaign 18 months ago after keeping rates near zero for 15 years after policymakers were caught off-guard following pandemic-era supply chain disruptions coupled with the Fed's rapid expansion of its balance sheet by $4 trillion.
Moreover, despite the end of pandemic-era supply chain disruptions, the Federal Reserve is supporting the surge in the annual budget deficit, which reached $1.7 trillion in the fiscal year 2023 ending in September.
Despite the multiple interest rate hikes, inflation has cooled but not dropped to the target rate of 2%, and the latest comments from Federal Reserve Chairman Powell suggest that policymakers are less likely to increase rates at the next meeting, but higher rates may be needed through 2024.
U.S. Indexes and Yields
The S&P 500 index increased 0.7% to 4,245.11, and the Nasdaq Composite rose 0.8% to 13,120.29.
The yield on 2-year Treasury notes increased to 5.09%, 10-year Treasury notes inched higher to 4.88%, and 30-year Treasury bonds edged up to 5.0%.
Crude oil decreased $0.78 to $84.76 a barrel, and natural gas prices edged up 1 cent to $2.93 a thermal unit.
The dollar index edged higher to 106.19, the level last seen in November 2022, and extended gains from the low of 99.85 on July 13, 2023.
U.S. Stock Movers
Coca-Cola Company jumped 2.8% to $55.63 after the beverage company reported stronger-than-expected third-quarter earnings and lifted its annual outlook as the company sold more cases of beverages.
General Motors Company rose 0.3% to $29.29 after the vehicle maker reported rising sales and earnings in the third quarter, but the automaker also pulled its annual earnings outlook, citing the ongoing United Auto Workers strike.
Revenue in the third quarter increased 5.4% to $41.89 billion, net income edged lower to $3.06 billion from $3.31 billion, and diluted earnings per share eased to $2.20 from $2.25 a year ago.
The company also withdrew its previously issued adjusted annual earnings outlook between $12 billion and $14 billion and net income attributable to shareholders between $9.3 billion and $10.7 billion.
Tesla Inc. rose 1.8% to $215.91, and the company said in a regulatory filing that it is facing several investigations from the Department of Justice covering a range of electric vehicles, "personal benefits and related parties and personnel decisions," and other issues involving its operations.
RTX Corp. soared 5.9% to $77.48 after the aerospace company reported better-than-expected revenue and earnings in its latest quarterly results.
Spotify Technology SA jumped 7.2% to $165.10 after the audio streaming company reported third-quarter revenue that met investors' expectations, and the company said monthly active subscribers are expected to top 600 million in the fourth quarter.
Europe Movers: Barclays, Bunzl, Hermes, Logitech, Mining Stocks, Puma, UniCredit
Inga Muller
24 Oct, 2023
Frankfurt
Benchmark indexes rebounded in Paris and Germany but indexes lacked direction in London after bond yields edged lower.
The DAX index increased 0.1% to 14,822.20, the CAC-40 index rose 0.5% to 6,886.58, and the FTSE 100 index eased 0.01% to 7,374.21.
The yield on 10-yetrar German bonds decreased to 2.81%, French bonds traded lower to 3.43%, the UK gilts edged down to 4.56%, and Italian bonds eased to 4.81%.
UniCredit SpA increased 1.3% to €22.99, and the Italian bank reported third-quarter earnings that were ahead of market expectations.
Logitech International SA increased 7.7% to CHF 66.22 after the Swiss computer accessories maker revised higher its annual outlook.
Anglo American, Glencore, and Antofagasta advanced between 0.6% and 0.9% after the U.S. dollar weakened and base metal prices edged higher.
Barclays Plc declined 6.5% to 135.22 pence after the U.K.-based lender warned that the financial services provider is facing margin pressures, and the bank said it plans to accelerate its plan to cut costs later in the year.
Lloyds Banking Group declined 1.9% to 40.66 pence, and NatWest Group Plc dropped 2.2% to 210.20 pence.
Puma SE soared 3.8% to €52.76 after the German sportswear maker reiterated its full-year outlook.
Hermes International SCA advanced 2.3% to €1,720.60 after the luxury goods maker reported third-quarter sales that were ahead of the market's expectations.
Bunzl Plc fell 3.8% to 2,802.0 pence after the distribution services provider said third-quarter revenue declined 4.8% at constant currency exchange rates.
"We reiterate our confidence in the group’s 2023 adjusted operating profit being moderately higher than in 2022 at constant exchange rates.
We expect Group revenue, at constant exchange rates, to be slightly lower than in 2022, with the benefit of announced acquisitions offset by some organic decline, following strong organic growth in recent years, and a small impact from UK healthcare disposal.
The operating margin in 2023 is now expected to reach the record level seen in recent years," the company said in an update to investors released Tuesday.
European Bonds Rebounded, Eurozone Output Declined at the Fastest Pace In Three Years
Bridgette Randall
24 Oct, 2023
Frankfurt
European markets turned higher after bond yields edged lower as investors reviewed regional economic data.
Benchmark indexes in Paris and Frankfurt advanced, but indexes in London lacked direction.
The Eurozone output contracted the most in nearly three years, according to the latest data compiled by S&P.
The HCOB Eurozone Composite PMI fell to 46.5 in October from 47.2 in September, the fifth monthly decline in a row in business activities.
Activities in both the manufacturing and service sectors declined, and the fall in activities was the steepest since November 2020 and sharpest since March 2013, when pandemic-era disruptions were excluded.
New orders declined the most since May 2020, and backlogs of orders eased at the fastest pace since June 2020.
Separate reports showed a mixed economic picture in the UK and Germany.
German consumer confidence declined for a third month in a row in November, and the UK's private sector activity contracted for the third month in a row, and the adjusted jobless rate edged up.
UK Jobless Rate Edged Higher
The adjusted unemployment rate for the three months to August increased to 4.2%, following a 4.0% rate in the previous three months ending in May, the Office for National Statistics reported Tuesday.
The adjusted employment rate decreased by 0.3 percentage points to 75.7%, and economic inactivity edged up 0.1 percentage point to 20.9%, as the report highlighted.
Last week, the statistical agency reported that the average earnings growth in the three months to August in the UK eased slightly to 8.1% from 8.5% in the previous period, but the increase was still one of the largest gains since record-keeping began in 2001.
Europe Indexes and Yields
The DAX index increased 0.1% to 14,822.20, the CAC-40 index rose 0.5% to 6,886.58, and the FTSE 100 index eased 0.01% to 7,374.21.
The yield on 10-yetrar German bonds decreased to 2.81%, French bonds traded lower to 3.43%, the UK gilts edged down to 4.56%, and Italian bonds eased to 4.81%.
The euro hovered near a three-month low at $1.06, the British pound at $1.22, and the U.S. dollar at 89.34 Swiss cents.
Brent crude increased $0.29 to $90.12 a barrel, and the Dutch TTF natural gas edged higher by €0.42 to €51.68 per MWh.
Europe Stock Movers
UniCredit SpA increased 1.3% to €22.99, and the Italian bank reported third-quarter earnings that were ahead of market expectations.
Logitech International SA increased 7.7% to CHF 66.22 after the Swiss computer accessories maker revised higher its annual outlook.
Anglo American, Glencore, and Antofagasta advanced between 0.6% and 0.9% after the U.S. dollar weakened and base metal prices edged higher.
Barclays Plc declined 6.5% to 135.22 pence after the U.K.-based lender warned that the financial services provider is facing margin pressures, and the bank said it plans to accelerate its plan to cut costs later in the year.
Lloyds Banking Group declined 1.9% to 40.66 pence, and NatWest Group Plc dropped 2.2% to 210.20 pence.
Puma SE soared 3.8% to €52.76 after the German sportswear maker reiterated its full-year outlook.
Hermes International SCA advanced 2.3% to €1,720.60 after the luxury goods maker reported third-quarter sales that were ahead of the market's expectations.
Bunzl Plc fell 3.8% to 2,802.0 pence after the distribution services provider said third-quarter revenue declined 4.8% at constant currency exchange rates.
"We reiterate our confidence in the group’s 2023 adjusted operating profit being moderately higher than in 2022 at constant exchange rates.
We expect Group revenue, at constant exchange rates, to be slightly lower than in 2022, with the benefit of announced acquisitions offset by some organic decline, following strong organic growth in recent years, and a small impact from UK healthcare disposal.
The operating margin in 2023 is now expected to reach the record level seen in recent years," the company said in an update to investors released Tuesday.
Asian Markets Attempt to Rebound, Hong Kong Index Drops to 1-year Low
Arjun Pandit
24 Oct, 2023
Mumbai
Asian markets traded mixed after U.S. Treasury yields edged lower and investors debated the rate path and its impact on global financial markets.
World financial markets have been on edge with the prospect of a wider conflict in the Middle East involving Lebanon, Iran, Turkey, Egypt, and Syria supporting Hamas and the U.S. supporting Israel.
Crude oil edged lower in Monday's trading after U.S. diplomats worked feverishly to arrange small aid for Gaza residents and hold off an Israeli military offensive, but tensions remained high in the region.
Israel said it carried out 324 targeted missile strikes in Gaza in the last 24 hours, and the Hamas-controlled Gaza health ministry said the civilian death toll reached 5,000.
With no end in sight for the Israel-Hams conflict, oil prices traded volatile amid worries of more violence in the region.
Benchmark indexes in Tokyo edged higher by 0.1%, and the closely watched manufacturing survey confirmed ongoing weak operating conditions in September.
The au Jibun Bank Japan Manufacturing PMI held at 48.5 in October, unchanged from the seven-month low reached in September.
The index declined for the fifth month in a row, primarily driven by weakness in new export orders and persistent weakness in domestic orders.
In addition, the backlog of orders declined for the 13th month in a row, with orders falling at a faster pace than in September.
China Stocks and Yuan Under Pressure
Market indexes in Hong Kong extended losses in 2023 due to persistent China growth worries and a steady stream of capital outflows.
The Hang Seng index declined 0.8% and the Shanghai Composite Index edged higher after China-controlled funds stepped up their purchases of ETFs on the Shanghai Stock Exchange.
In Hong Kong, tech stocks led stock decliners, and the benchmark index extended this year's loss to 15.9% after investors returned from a three-day holiday.
The Hang Seng index dropped to a 12-month low on the deepening malaise in the housing market, and the prospect of higher interest rates in the U.S. is draining interest in international investing.
Investors pulled out $5.1 billion this month, following the withdrawal of $75 billion in September, the most since December 2016, Goldman Sachs said in a research note.
In offshore trading, the yuan fell 0.03% to 7.30 against the U.S. dollar, and the tightly managed currency
Foreign investors withdrew $42 billion in August from the Chinese market, and the yuan has been under pressure for the last three months as the currency trades near its 16-year low.
Financial markets in India were closed to celebrate the Dassehra holiday, and the Sensex index fell sharply in Monday's trading, reacting to the rising U.S. bond yields and the worries of a wider conflict in the Middle East.
The Sensex index and the Nifty index declined 1.3% in Monday's trading, but the Indian rupee held firm against the U.S. dollar.
The KOSPI index in Seoul added 1%, and the ASX 200 index in Sydney edged higher by 0.2%.
Four leading banks in Australia—National Australian Bank, Westpac, Commonwealth Bank, and ANZ Banking—edged higher between 0.3% and 0.6%.
Mining companies BHP Group and Rio Tinto gained more than 1%, but Newcrest Mining Ltd. edged down 1.1%.
Bond Market Volatility Leave the S&P 500 and Nasdaq Rudderless
Barry Adams
23 Oct, 2023
New York City
Stocks rebounded from morning weakness and advanced after the 10-year Treasury yield retreated from 5%.
Benchmark indexes advanced 0.5% after falling more than 2% in the previous week on worries that the Federal Reserve is more likely to lift rates than previously thought.
Traders bid up stocks, but the lingering worries of another rate hike and higher rates through 2024 kept enthusiasm for stocks in check.
For more than a year, investors held the belief that interest rates would begin to ease in the fourth quarter of this year, and rates were nearing their peak in the early summer.
The steady drumbeat of peak interest rates for three months beginning in May emboldened investors to increase exposure to high-growth and tech stocks.
However, investor sentiment began to shift after the Federal Reserve held rates steady last month and, more importantly, revised its estimate of GDP to just over 2% from the previous estimate of 1%.
The sharp revision of economic growth also suggested that the economy is resilient enough to withstand higher rates.
Policymakers are more likely to raise rates if inflation stays well above the Fed's target rate of 2% amid persistently tight labor market conditions and economic growth above 2%.
The good news on the economic front is bad news for the bond market because faster-than-expected economic growth along with tight labor conditions will more likely keep inflation above the Fed's target rate.
Moreover, the U.S. federal government budget deficit rose to $1.7 trillion in the fiscal year 2023 that ended in September, an increase of 23% from a year ago after revenue declined and federal expenses rose on the back of higher Social Security, Medicare, and Medicaid commitments.
Tax revenue declined more than 40% because of lower capital gains after the collapse of the stock market in 2022, and the Internal Revenue Service also extended tax deadlines to natural disaster-affected areas in California, Georgia, and Alabama.
Investors are also looking ahead to a barrage of earnings from leading tech companies, and at least 700 companies are scheduled to announce their quarterly results this week.
Alphabet, Amazon.com, Meta, and Microsoft are scheduled to report their quarterly earnings this week.
U.S. Indexes and Yields
The S&P 500 index increased 0.4% to 4,241.51, and the Nasdaq Composite rose 0.9% to 13,097.05.
The yield on 2-year Treasury notes increased to 5.06%, 10-year Treasury notes inched higher to 4.86%, and 30-year Treasury bonds edged up to 4.98%.
Crude oil decreased $2.45 to $85.57 a barrel, and natural gas prices rose 3 cents to $2.93 a thermal unit.
The dollar index edged higher to 106.09, the level last seen in November 2022, and extended gains from the low of 99.85 on July 13, 2023.
U.S. Stock Movers
Hess Corp. edged up 0.9% to $164.61 after the company agreed to an all-cash merger deal with Chevron for $171 a share, or $57 billion.
Chevron Corp. declined 2.2% to $163.12.
Apple Inc. declined 0.8% to $171.43 on the news that the Chinese government has opened a tax inquiry and land-use investigation for its largest supplier, Foxconn.
Taiwan-based Foxconn assembles many iPhone models in China and increasingly in India to diversify its production away from mainland China.
Stellantis NV edged up 0.9% to $19.05, and the United Auto Workers union said it plans to expand the strike to a plant in Michigan that produces Ram full-size pickup trucks.
The Sterling Heights, Michigan, plant has about 6,800 vehicle assembly workers.
Economic Worries and Rising Bond Yields Keep European Indexes Down
European markets extended the previous week's losses, and bond yields continued to advance.
Benchmark indexes in Paris, Frankfurt, and London fell between 0.3% and 0.7%, and bond yields in the Euro Area rose following the rise in 10-year U.S. Treasury notes.
European market indexes continued to drift lower on the rate uncertainties, looming economic slowdown and worries of resurgent inflation following the rebound in crude oil prices.
The European Central Bank's policy committee is scheduled to meet in Athens, and investors are anticipating no change in rates at the end of the meeting on Thursday.
However, the outlook for interest rates is highly uncertain because inflation is significantly ahead of 2%, despite multiple rate hikes by the European Central Bank and the Bank of England.
The rate uncertainties, combined with the recent rebound in crude oil prices, are keeping investors nervous as earnings season rolls on.
Europe Indexes and Yields
The DAX index increased 0.02% to 14,800.72, the CAC-40 index rose 0.5% to 6,850.47, and the FTSE 100 index dropped 0.4% to 7,374.83.
The yield on 10-yetrar German bonds increased to 2.94%, French bonds traded higher to 3.56%, the UK gilts edged up to 4.70%, and Italian bonds eased to 4.95%.
The euro hovered near a three-month low at $1.06, the British pound at $1.216, and the U.S. dollar at 89.20 Swiss cents.
Brent crude decreased $2.48 to $89.68 a barrel, and the Dutch TTF natural gas edged lower by €1.39 to €49.73 per MWh.
Europe Stock Movers
In Paris trading, banks led the decliners on the worries of higher interest rates, adding to the losses in bond portfolios held by banks.
BNP Paribas, Societe Generale, and Credit Agricole traded between -0.3% and 0.3%.
Renault SA extended losses to the second week and fell 1.5% to €32.74 after currency losses in Turkey and Argentina overwhelmed the overall results.
Mining and energy companies led the decline in London trading after market indexes in Shanghai, Shenzhen, and Hong Kong dropped to multi-month lows.
Anglo American, Antofagasta, Glencore, and Fresnillo dropped between 1% and 2.5%.
Homebuilders were also among the leading decliners in London trading after bond yields advanced in the U.K. and raised the prospect of another cycle of mortgage rate hikes.
In Frankfurt, Commerzbank and Deutsche Bank were among the leading decliners, with losses of 0.4%.
Vehicle makers were among the leading decliners on the twin worries of a looming global economic slowdown and rising competition from electric vehicle makers in China.
Volkswagen Group declined 1.6% to €101.50, Mercedes Benz dropped 0.5% to €61.46, and Porsche Automobil Holding SE fell 2.2% to €43.62.
Treasury Yields Hover Near 5% and Rate Worries Keep Market Indexes In Check
Barry Adams
23 Oct, 2023
New York City
Benchmark indexes on Wall Street traded lower, and Treasury yields advanced as investors recalibrated interest rate expectations.
For more than a year, investors held the belief that interest rates would begin to ease in the fourth quarter of this year, and rates were nearing their peak in the early summer.
However, investor sentiment began to shift after the Federal Reserve held rates steady last month and, more importantly, revised its estimate of GDP to just over 2% from the previous estimate of 1%.
The sharp revision of economic growth also suggested that the economy is resilient enough to withstand higher rates.
Policymakers are more likely to raise rates if inflation stays well above the Fed's target rate of 2% amid persistently tight labor market conditions and economic growth near 2%.
Moreover, the U.S. federal government budget deficit rose to $1.7 trillion in the latest fiscal year that ended in September, an increase of 23% from a year ago after revenue declined and federal expenses rose on the back of higher Social Security, Medicare, and Medicaid.
Tax revenue declined more than 40% because of lower capital gains after the collapse of the stock market in 2022, and the Internal Revenue Service also extended tax deadlines to natural disaster-affected areas in California, Georgia, and Alabama.
Investors are also looking ahead to a barrage of earnings from leading tech companies, and at least 700 companies are scheduled to announce their quarterly results this week.
Alphabet, Amazon.com, Meta, and Microsoft are scheduled to report their quarterly earnings this week.
U.S. Indexes and Yields
The S&P 500 index decreased 0.9% to 4,237.43, and the Nasdaq Composite fell 1.3% to 13,002.46.
The yield on 2-year Treasury notes increased to 5.11%, 10-year Treasury notes inched higher to 4.96%, and 30-year Treasury bonds edged up to 5.11%.
Crude oil decreased $0.89 to $87.21 a barrel, and natural gas prices rose 1 cent to $2.91 a thermal unit.
The dollar index edged higher to 106.09, the level last seen in November 2022, and extended gains from the low of 99.85 on July 13, 2023.
U.S. Stock Movers
Hess Corp. edged up 0.9% to $164.61 after the company agreed to an all-cash merger deal with Chevron for $171 a share, or $57 billion.
Chevron Corp. declined 2.2% to $163.12.
Apple Inc. declined 0.8% to $171.43 on the news that the Chinese government has opened a tax inquiry and land-use investigation for its largest supplier, Foxconn.
Taiwan-based Foxconn assembles many iPhone models in China and increasingly in India to diversify its production away from mainland China.
Stellantis NV edged up 0.9% to $19.05, and the United Auto Workers union said it plans to expand the strike to a plant in Michigan that produces Ram full-size pickup trucks.
The Sterling Heights, Michigan, plant has about 6,800 vehicle assembly workers.
Lingering Economic Worries and Rising Bond Yields Keep European Stocks Down
Bridgette Randall
23 Oct, 2023
Frankfurt
European markets extended the previous week's losses, and bond yields continued to advance.
Benchmark indexes in Paris, Frankfurt, and London fell between 0.3% and 0.7%, and bond yields in the Euro Area rose following the rise in 10-year U.S. Treasury notes.
European market indexes continued to drift lower on the rate uncertainties, looming economic slowdown and worries of resurgent inflation following the rebound in crude oil prices.
The European Central Bank's policy committee is scheduled to meet in Athens, and investors are anticipating no change in rates at the end of the meeting on Thursday.
However, the outlook for interest rates is highly uncertain because inflation is significantly ahead of 2%, despite multiple rate hikes by the European Central Bank and the Bank of England.
The rate uncertainties, combined with the recent rebound in crude oil prices, are keeping investors nervous as earnings season rolls on.
Europe Indexes and Yields
The DAX index decreased 0.8% to 14,679.77, the CAC-40 index fell 0.2% to 6,802.85, and the FTSE 100 index dropped 0.6% to 7,354.99.
The yield on 10-yetrar German bonds increased to 2.94%, French bonds traded higher to 3.56%, the UK gilts edged up to 4.70%, and Italian bonds eased to 4.95%.
The euro hovered near a three-month low at $1.06, the British pound at $1.216, and the U.S. dollar at 89.20 Swiss cents.
Brent crude decreased $0.31 to $91.82 a barrel, and the Dutch TTF natural gas edged lower by €2.40 to €48.72 per MWh.
Europe Stock Movers
In Paris trading, banks led the decliners on the worries of higher interest rates, adding to the losses in bond portfolios held by banks.
BNP Paribas, Societe Generale, and Credit Agricole traded between -0.3% and 0.3%.
Renault SA extended losses to the second week and fell 1.5% to €32.74 after currency losses in Turkey and Argentina overwhelmed the overall results.
Mining and energy companies led the decline in London trading after market indexes in Shanghai, Shenzhen, and Hong Kong dropped to multi-month lows.
Anglo American, Antofagasta, Glencore, and Fresnillo dropped between 1% and 2.5%.
Homebuilders were also among the leading decliners in London trading after bond yields advanced in the U.K. and raised the prospect of another cycle of mortgage rate hikes.
In Frankfurt, Commerzbank and Deutsche Bank were among the leading decliners, with losses of 0.4%.
Vehicle makers were among the leading decliners on the twin worries of a looming global economic slowdown and rising competition from electric vehicle makers in China.
Volkswagen Group declined 1.6% to €101.50, Mercedes Benz dropped 0.5% to €61.46, and Porsche Automobil Holding SE fell 2.2% to €43.62.
U.S. Movers: American Express, CSX, Intuitive Surgical, Regions Financial, Solar Edge Technologies
Scott Peters
20 Oct, 2023
New York City
SolarEdge Technologies plunged 30.8% to $79.31 after the company lowered its third-quarter revenue outlook, citing cancellations and deferrals in Europe.
The company lowered its revenue range between $720 million and $730 million from the previous estimate between $880 million and $920 million.
Enphase Energy dropped 13.5% to $100.34 and First Solar declined 0.2% to $151.75, after SolarEdge revised its sales outlook.
Intuitive Surgical declined 4.5% to $260.95 after the robotic surgery device maker reported mixed quarterly results.
The company said total revenue increased 12% to $1.74 billion from $1.55 billion, net income soared to $415.7 million from $324.0, and diluted earnings per share advanced to $1.16 to 90 cents a year ago.
CSX Corp. added 2.1% to $31.18 after the railroad company reported mixed quarterly results.
Revenue in the third quarter declined 8% to $3.6 billion from $3.9 billion, net income plunged 24% to $846 million from $1.1 billion, and diluted earnings per share decreased to 42 cents from 52 cents a year ago.
American Express Company declined 3.2% to $144.92 despite the financial services company reporting positive quarterly results and demand for premium membership cards.
The charge card company posted sixth quarter in a row of record revenue but also hiked provision for delinquent accounts to $1.23 billion from $778 million a year ago.
Total revenue net of interest expenses increased 13% to $15.4 billion from $13.6 billion, net income advanced 30% to $2.5 billion from $1.9 billion, and diluted earnings per share advanced to $3.30 from $2.47 a year ago.
Regions Financial Corp plunged 15.5% to $14.0 after the regional bank reported weaker-than-expected quarterly results and also forecasted a decline in net interest income in the fourth quarter.
Net interest income in the third quarter increased by 2.3% to $1.29 billion from $1.26 billion, net income advanced to $490 million from $429 million, and diluted earnings per share rose to 49 cents from 43 cents a year ago.
Net interest margin in the quarter rose to 3.73% from 3.53% a year ago, and net interest income is expected to decline 5% in the fourth quarter and fall 11% in 2023 from 2022.