Market Update
Market Averages Sink as 10-year Treasury Yield Crosses 5%
Barry Adams
20 Oct, 2023
New York City
Stocks faced headwinds after Treasury yields advanced and crude oil traded higher for the second week in a row on the worries of the Israel-Hamas war spreading to neighboring states.
The S&P 500 index and the Nasdaq Composite declined more than 0.8%, and tech stocks led the decliners after the yield on benchmark 10-year Treasury notes crossed 5%.
The benchmark bond yield is jumping above 5% for the first time since 2007.
On Thursday, Federal Reserve Chairman Jerome Powell stressed at a gathering in New York that rates are not restrictive enough and interest rates may have to stay higher for longer to cool inflation to the 2% target rate.
The yield on the 10-year Treasury advanced after Powell's comments and continued to rise in Friday's trading.
Israel-Hamas Conflict Worries Lift Crude Oil Higher
The prospect of the Israel-Hamas war spreading to neighboring countries kept investors on the sidelines after protests erupted in Iran, Iraq, Lebanon, Egypt, and Turkey.
Moreover, a U.S. Navy ship in the Red Sea intercepted missiles and drones fired by Iran-backed Huthi rebels in Yemen.
The wider conflict in the Middle East could disrupt crude oil supplies in the region and put additional pressure on prices.
In addition, the U.S. is planning to buy six million barrels of crude oil to replenish its strategic oil reserves with deliveries in December and January.
To facilitate the purchase, the U.S. eased sanctions on the Venezuelan oil sector as the oil market is struggling with production cuts extended till the end of 2023 by the two largest oil exporters, Russia and Saudi Arabia.
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 decreased to 5.08%, 10-year Treasury notes inched lower to 4.91%, and 30-year Treasury bonds edged up to 5.08%.
Crude oil decreased $1.09 to $89.48 a barrel, and natural gas prices fell 4 cents to $2.90 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
SolarEdge Technologies Inc 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 Inc. dropped 13.5% to $100.34 and Frist Solar declined 0.2% to $151.75, after SolarEdge revised its sales outlook.
Intuitive Surgical, Inc 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.
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.
Europe Movers: Husqvarna AB, InterContinental Hotels, L'Oreal, Sika, Vivendi
Inga Muller
20 Oct, 2023
Frankfurt
European markets accelerated declines on the final day of the week and extended losses amid rising tensions in the Middle East, oil supply disruption worries, and interest rate uncertainties.
The DAX index decreased 1.2% to 14,860.79, the CAC-40 index fell 1.2% to 6,835.88, and the FTSE 100 index dropped 0.7% to 7,447.13.
The yield on 10-year German bonds increased to 2.93%, French bonds traded higher to 3.55%, the UK gilts edged up to 4.70%, and Italian bonds eased to 4.94%.
Husqvarna AB Class B declined 7.7% to 73.04 kronor after the Swedish garden equipment reported third-quarter revenue that fell short of market expectations.
In addition, the company announced 300 job cuts.
Sika AG increased 0.3% to CHF 218.80 after the Swiss chemical company reiterated its fiscal 2023 outlook.
L'Oreal SA declined 1.3% to €381.05 after the French cosmetic company's third quarter sales fell short of market expectations.
Vivendi SE advanced 2.5% to €8.46 after the French media company said third-quarter sales rose 2.5% to 2.43 billion from 2.37 billion a year ago.
Canal + Group revenue in the quarter increased 5.7%, and Havas Group revenue increased 4.5%, driven by increases in all divisions in the group.
InterContinental Hotels Group decreased 3.6% to 5,931.0 pence after the company said new hotel developments are on hold till the company is able to arrange short-term financing.
Worries of Wider Conflict In Middle East Extended Weekly Losses In European Markets
Bridgette Randall
20 Oct, 2023
Frankfurt
European markets extended weekly losses after crude oil prices advanced following worries of a widening conflict in the Middle East.
The prospect of the Israel-Hamas war spreading to neighboring countries kept investors on the sidelines after protests erupted in Iran, Iraq, Lebanon, Egypt, and Turkey.
Moreover, a U.S. Navy ship in the Red Sea intercepted missiles and drones fired by Iran-backed Huthi rebels in Yemen.
The wider conflict in the Middle East could disrupt crude oil supplies in the region and put additional pressure on prices.
In addition, the U.S. is planning to buy six million barrels of crude oil to replenish its strategic oil reserves with deliveries in December and January.
To facilitate the purchase, the U.S. eased sanctions on the Venezuelan oil sector as the oil market is struggling with production cuts extended till the end of 2023 by the two largest oil exporters, Russia and Saudi Arabia.
On the economic front, investors reviewed the sharp decline in Germany's producer price index and the fall in the UK's retail sales.
The German wholesale price index dropped at a record pace
Germany's producer price index fell at record pace for the second month in a row in September, largely because of the higher price base a year ago, the Federal Statistics Office reported Friday.
Producer prices fell 14.7% in September from a year ago, following a 12.6% decline in August.
The measure of wholesale price declined for the third month in a row, and prices fell at the fastest pace since record-keeping began in 1949.
On a monthly basis, producer prices declined 0.2% after rising 0.3% in August.
UK Retail Sales Declined In September.
Retail sales in the U.K. declined 0.9% in September from August, the Office for National Statistics reported Friday.
The cost of living crisis combined with unusually warm weather dragged down non-food store sales by 1.9% in the month, including sales at furniture, jewelry, watches, apparel, and department stores.
Food-store sales increased by 0.2%, and fuel sales rose by 0.8%.
On an annual basis, retail sales declined 1%, the smallest decline since sales started dropping in April 2022.
EU car Registrations Expanded In September
New car registration in the European Union increased 9.2% to 861,062 units, the European Automobile Manufacturers' Association reported Friday.
New car registration increased for the fourteenth month in a row as supply chain disruptions eased.
Passenger car registrations soared 22.7% from a year ago in Italy and jumped 10.7% in France, but declined 0.1% in Germany.
Petrol-fueled passenger cars led the registrations, but market share decreased to 34.1% from 35.3% a year ago, followed by hybrid-electric cars with 27.3% and battery-powered cars with 14.8%.
Europe Indexes and Yields
The DAX index decreased 1.2% to 14,860.79, the CAC-40 index fell 1.2% to 6,835.88, and the FTSE 100 index dropped 0.7% to 7,447.13.
The yield on 10-year German bonds increased to 2.93%, French bonds traded higher to 3.55%, the UK gilts edged up to 4.70%, and Italian bonds eased to 4.94%.
The euro hovered near a three-month low at $1.058, the British pound at $1.212, and the U.S. dollar at 89.16 Swiss cents.
Brent crude increased $1.0 to $93.37 a barrel, and the Dutch TTF natural gas edged higher by €1.70 to €51.87 per MWh.
Europe Stock Movers
Husqvarna AB Class B declined 7.7% to 73.04 kronor after the Swedish garden equipment reported third-quarter revenue that fell short of market expectations.
In addition, the company announced 300 job cuts.
Sika AG increased 0.3% to CHF 218.80 after the Swiss chemical company reiterated its fiscal 2023 outlook.
L'Oreal SA declined 1.3% to €381.05 after the French cosmetic company's third quarter sales fell short of market expectations.
Vivendi SE advanced 2.5% to €8.46 after the French media company said third-quarter sales rose 2.5% to 2.43 billion from 2.37 billion a year ago.
Canal + Group revenue in the quarter increased 5.7%, and Havas Group revenue increased 4.5%, driven by increases in all divisions in the group.
InterContinental Hotels Group decreased 3.6% to 5,931.0 pence after the company said new hotel developments are on hold till the company is able to arrange short-term financing.
U.S. Market Averages Skidded After Powell Comments Suggested Higher-for-Longer Rates Ahead
Barry Adams
19 Oct, 2023
New York City
Market indexes turned sharply lower after investors reviewed the latest comments from the Federal Reserve Chairman Jerome Powell.
Fed Chair Powell stressed that interest rates are still not "restrictive enough" and higher rates may be needed if inflation fails to cool to the target rate of 2%.
In an unusual admission, Powell said that inflation was driven higher not only by distortions in supply chains but also in demand.
Demand surged during the pandemic era between 2020 and 2022 after the Federal Reserve revved up its printing presses and pumped money into the economy through various government stimulus measures and the U.S. Treasury bonds purchases.
Powell added that despite the recent cooling of inflation as measured by the core PCE Index, inflation is still hovering at 3.7%, ahead of the Fed target rate.
Monetary policy may not be restrictive enough and may need more tightening, and below-trend economic growth rate and additional softening in labor market conditions, Chairman Powell stressed in comments delivered at a gathering in New York.
Investors appeared divided about the future direction of interest rate in the short-term, but interest rates are likely to stay higher through 2024.
The S&P 500 index and the Nasdaq Composite index extended weekly losses to 2.4% and 3.2% respectively as investors debated the Fed's next move and rate path and level after the policy meeting at the end of this month.
The yield on 10-year Treasury notes edged higher and hovered near 5% level and investors increased the likelihood of a rate hike at the end of the next policy meeting on November 1.
In stock trading, market indexes accelerated decline and rate sensitive stocks led the losers after Chairman Powell stressed the need for restrictive rates.
Investors reacted positively after Netflix reported a surge in net paid subscribers in the third quarter and forecasted revenue growth to sustain in the fourth quarter.
Tesla faced headwinds after the electric vehicle maker reported a sharp drop in quarterly earnings and a decline in gross margin after the company offered larger-than-usual discounts.
Weekly Jobless Claims Fell
On the economic front, the initial jobless claims declined 14,000 to 198,000 for the week ending on October 14, the U.S. Department of Labor reported Thursday.
The weekly jobless claims dropped to the lowest level since January, confirming the tight labor market conditions.
Existing Home Sales Dropped to a 13-year Low Annual Rate
Existing home sales continued to decline confirming housing market trends reported by recent releases.
Existing home sales in September decreased 2.0% from August and dropped 15.4% from a year ago to a seasonally adjusted annual rate of 3.98 million.
Rising mortgage rates and elevated home prices discouraged first-time home buyers from seeking homes, and the share of first-time home buyers dropped to 27% from 29%.
The number of home transactions dropped to a 13-year low largely because homeowners locked with low interest mortgage rates struggled to justify new purchases.
"As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales," said NAR Chief Economist Lawrence Yun.
Home prices advanced for the third month in a row, confirming that demand for housing is still strong.
The median existing-home price for all housing types in September increased 2.8% to $394,300, and prices rose in all four U.S. regions.
U.S. Indexes & Yields
The S&P 500 index decreased 0.9% to 4,278.0 and the Nasdaq Composite fell 1.0% to 13,186.28.
The yield on 2-year Treasury notes increased to 5.16%, 10-year Treasury notes inched higher to 4.99% and 30-year Treasury bonds edged up to 5.11%.
Crude oil decreased $0.89 to $87.46 a barrel and natural gas prices fell 2 cents to $3.07 a thermal unit.
The dollar index edged higher to 106.29, the level last seen in November 2022 and extended gains from the low of 99.85 on July 13, 2023.
U.S. Stock Movers
Tesla Inc decreased 7.5% to $224.30 after the electric vehicle maker reported a sharp decline in its quarterly profits and weaker margins.
Revenue in the third quarter increased 9% to $23.4 billion from $21.5 billion and net income attributable to shareholders plunged 44% to $1.9 billion from $3.3 billion and diluted earnings per share dropped to 53 cents from 95 cents a year ago.
Moreover, free cash flow plunged to $848 million from $3.3 billion as the company continued its investment in Artificial Intelligence based products, autonomous vehicles and its much delayed Cybertruck vehicle.
Netflix Inc soared 15% to $397.60 after the video streaming platform operator reported sharply higher revenue and earnings growth and added that the company is likely to exceed its annual free cash flow estimate.
Revenue in the third quarter increased 7.8% to $8.5 billion from $7.9 billion and net income surged to $1.7 billion from $1.4 billion and diluted earnings per share advanced to $3.73 from $3.10 a year ago.
Global streaming paid members increased by 8.76 million to 247.15 million, an increase of 10.8% from a year ago.
Free cash flow soared to $1.9 billion from $472 million a year earlier.
The streaming platform estimated revenue in the fourth quarter to jump 11% to $8.7 billion and paid net additions to match the increase in the third quarter.
Rising Bond Yields Pushed Stock Market Indexes Down In Europe
Market indexes in Europe extended weekly losses after weak corporate results and rising bond yields compounded market anxieties.
The yields on government bonds advanced after the yield on 10-year U.S. Treasury notes approached 16-year high of 5%.
The yields on German bonds, French bonds and Italian bonds inched forward and hovered near the levels last seen in 2011.
Moreover, rising tensions in the Middle East also added to market jitters on the worries that Israel's aggressive response to Hamas-led attack and kidnappings may widen the conflict in the Middle East.
Widespread protests in Turkey, Iran, Iraq, Lebanon, Egypt and Malaysia and in Washington D.C and London called for immediate ceasefire and also put additional pressures on diplomats seeking a peaceful solution.
Palestinians feared that Israel's call for evacuation in north Gaza will be followed by a ground invasion and then confiscation of their land, the root cause of the seven-decade long conflict.
On the earnings front, weak results from Nokia, Nestle, Renault also weighed on the market sentiment.
Euro Area Surplus Expanded
The Euro Area current account surplus expanded in August after trade surplus rose, the European Central Bank reported Thursday.
The current account surplus increased to €28 billion from €21 billion in the previous month.
International goods trade surplus in the month rose to €35 billion from €25 billion but the service surplus narrowed to €6 billion from €10 billion in the previous month.
In the twelve months to August, the current account surplus rose to €126 billion, or 0.9% of the euro area GDP, from €12 billion surplus or 0.1% of GDP a year ago.
Europe Indexes & Yields
The DAX index decreased 0.3% to 15,045.23, the CAC-40 index fell 0.4% to 6,921.37 and the FTSE 100 index fell 1.2% to 7,499.53.
The yield on 10-year German bonds increased to 2.93%, French bonds traded higher to 3.55%, the UK gilts edged up to 4.70% and Italian bonds eased to 4.99%.
The euro hovered near a three-month low to $1.055, the British pound to $1.212 and the U.S. dollar fetched 89.72 Swiss cents.
Brent crude increased $1.11 to $92.61 a barrel and the Dutch TTF natural gas edged lower by €0.66 to €50.17 per MWh.
Europe Stock Movers
Nestle SA decreased 2.2% to CHF 99.89 after the Swiss food company's nine-month sales growth disappointed investors.
Nokia Oyj dropped 6.0% to €3.07 after the company reported weaker-than-expected third quarter results and the company also said it plans to trim its workforce.
Hargreaves Lansdown PLC fell 4.5% to 704.50 pence after the retail financial services provider said client acquisition growth declined in the fiscal first quarter.
McBride Plc soared 19.5% to 38.86 pence after the U.K.-based household products maker said market momentum of the second-half fiscal 2023 continued in the fiscal 2024 first quarter.
Merck KGaA jumped 2.4% to €149.0 after the German pharmaceutical company forecasted sales growth to return in the fiscal 024 and the growth is expected to continue beyond 2025.
Sartorius AG decreased 1.2%to €208.0 after the German biotech company reported results for the first nine months of the year.
Pernod Ricard SA jumped 4% to €164.90 after the French wine and spirits maker forecasted higher sales in the fiscal 2024.
Renault SA dropped 6.7% to €33.74 after the French automaker said currency weakness in Turkey and Argentina weighed heavily on its sales growth in the third quarter.
U.S. Movers: Ally Financial, American Airlines, Las Vegas Sands, Netflix, Pool Corp, Tesla
Scott Peters
19 Oct, 2023
New York City
Stocks rebounded in the afternoon and benchmark indexes scaled higher after investors reviewed rececnt comments from Federal Reserve Chairman Jerome Powell.
The S&P 500 index increased 0.1% to 4,318.15 and the Nasdaq Composite rose 0.2% to 13,332.71.
The yield on 2-year Treasury notes increased to 5.21%, 10-year Treasury notes inched higher to 4.94% and 30-year Treasury bonds edged up to 5.02%.
Tesla Inc decreased 7.5% to $224.30 after the electric vehicle maker reported a sharp decline in its quarterly profits and weaker margins.
Revenue in the third quarter increased 9% to $23.4 billion from $21.5 billion and net income attributable to shareholders plunged 44% to $1.9 billion from $3.3 billion and diluted earnings per share dropped to 53 cents from 95 cents a year ago.
Moreover, free cash flow plunged to $848 million from $3.3 billion as the company continued its investment in Artificial Intelligence based products, autonomous vehicles and its much delayed Cybertruck vehicle.
Netflix Inc soared 15% to $397.60 after the video streaming platform operator reported sharply higher revenue and earnings growth and added that the company is likely to exceed its annual free cash flow estimate.
Revenue in the third quarter increased 7.8% to $8.5 billion from $7.9 billion and net income surged to $1.7 billion from $1.4 billion and diluted earnings per share advanced to $3.73 from $3.10 a year ago.
Global streaming paid members increased by 8.76 million to 247.15 million, an increase of 10.8% from a year ago.
Free cash flow soared to $1.9 billion from $472 million a year earlier.
The streaming platform estimated revenue in the fourth quarter to jump 11% to $8.7 billion and paid net additions to match the increase in the third quarter.
Pool Corporation declined 2.3% to $329.03 after the pool supplies company reported mixed quarterly results.
Revenue in the third quarter declined 9% to $1.5 billion from $1.6 billion and net income fell 27% to $137.8 million from $190 million and diluted earnings per share fell to $3.51 from $4.78 a year ago.
The pool supplies wholesaler guided its annual earnings per share in the range between $13.15 and $13.65, compared to pre-pandemic $6.14 per share in 2019.
American Airlines Group Inc increased 2.8% to $11.67 after the company reported record quarterly revenue but swung to a loss.
Revenue in the third quarter edged up 0.1% to $13.5 billion and net income swung to a loss of $545 million from a profit of $483 million and diluted earnings per share was ($0.89) compared to 69 cents a year ago.
The airline is focused on lowering its debt from record high during the height of pandemic disruptions and using the rebound in cash flow to pay down its debt.
American reduced total debt by $1.4 billion in the third quarter and the company is more than 70% of the way to its goal of reducing total debt by $15 billion by the end of 2025.
As of Sept. 30, 2023, American had reduced its total debt by approximately $10.9 billion from peak levels in mid-2021.
The company estimated a fourth quarter adjusted operating margin between 2% and 4% and full-year 2023 margin of 7%.
Ally Financial Inc declined 1.2% to $25.31 after the automobile loans provider reported weaker-than-expected revenue growth.
Revenue in the third quarter declined 2% to $1.96 billion from $2.06 billion and net income dropped 1% to $269 million from $272 million and earnings per share was unchanged at 88 cents.
In the vehicle financing business, the core driver of the company's revenue, net interest margin declined 57 basis points from a year ago to 3.24% and loan loss provision increased by $70 million to $508 million from a year ago.
In the quarter, the company originated $10.6 billion of auto loans, including $6.9 billion of used retail volume, or 66% of total originations, $2.9 billion of new retail volume, and $0.7 billion of leases.
Estimated retail auto loans are estimated to yield 10.7% in the quarter, an increase of 193 basis points from a year ago.
In the quarter the company added 95,000 new retail bank customers, increasing the total to 3 million with a total deposit of $140 billion and 92% of balances are FDIC insured.
Las Vegas Sands Corp added 3.7% to $46.26 after the casino operator reported a rebound in revenue at its international locations.
Revenue in the third quarter soared to $2.7 billion from $1.0 billion and swung to a net income of $380 million from a loss of $239 million and diluted earnings per share rose to 50 cents from ($0.30).
The company increased its stock repurchase program to $2 billion and extended expiry to 2025 from the current $916 million and announced a quarterly dividend of 20 cents, matching the rate in the previous quarter.
Rising Treasury Yields Ahead of Powell Comments Cast Long Shadow Over Stock Markets
Barry Adams
19 Oct, 2023
New York City
Market indexes on Wall Street lacked direction and the popular averages are likely to extend weekly losses after bond yields approached 16-year highs.
The S&P 500 index and the Nasdaq Composite index lacked directions and for the week are down 0.3% and 0.7% respectively as investors reviewed latest earnings results.
The yield on 10-year Treasury notes edged higher ahead of comments from the Federal Reserve Chairman Jerome Powell and investors are factoring another rate hike at the end of the next policy meeting ending on November 1.
Investors reacted positively after Netflix reported a surge in net paid subscribers in the third quarter and forecasted revenue growth to sustain in the fourth quarter.
Tesla faced headwinds after the electric vehicle maker reported a sharp drop in quarterly earnings and a decline in gross margin after the company offered larger-than-usual discounts.
On the economic front, the initial jobless claims declined 14,000 to 198,000 for the week ending on October 14, the U.S. Department of Labor reported Thursday.
The weekly jobless claims dropped to the lowest level since January, confirming the tight labor market conditions.
U.S. Indexes & Yields
The S&P 500 index increased 0.1% to 4,318.15 and the Nasdaq Composite rose 0.2% to 13,332.71.
The yield on 2-year Treasury notes increased to 5.21%, 10-year Treasury notes inched higher to 4.94% and 30-year Treasury bonds edged up to 5.02%.
Crude oil decreased $0.89 to $87.46 a barrel and natural gas prices fell 2 cents to $3.07 a thermal unit.
The dollar index edged higher to 106.29, the level last seen in November 2022 and extended gains from the low of 99.85 on July 13, 2023.
U.S. Stock Movers
Tesla Inc decreased 7.5% to $224.30 after the electric vehicle maker reported a sharp decline in its quarterly profits and weaker margins.
Revenue in the third quarter increased 9% to $23.4 billion from $21.5 billion and net income attributable to shareholders plunged 44% to $1.9 billion from $3.3 billion and diluted earnings per share dropped to 53 cents from 95 cents a year ago.
Moreover, free cash flow plunged to $848 million from $3.3 billion as the company continued its investment in Artificial Intelligence based products, autonomous vehicles and its much delayed Cybertruck vehicle.
Netflix Inc soared 15% to $397.60 after the video streaming platform operator reported sharply higher revenue and earnings growth and added that the company is likely to exceed its annual free cash flow estimate.
Revenue in the third quarter increased 7.8% to $8.5 billion from $7.9 billion and net income surged to $1.7 billion from $1.4 billion and diluted earnings per share advanced to $3.73 from $3.10 a year ago.
Global streaming paid members increased by 8.76 million to 247.15 million, an increase of 10.8% from a year ago.
Free cash flow soared to $1.9 billion from $472 million a year earlier.
The streaming platform estimated revenue in the fourth quarter to jump 11% to $8.7 billion and paid net additions to match the increase in the third quarter.
Europe Movers: Hargreaves Lansdown, McBride, Merck, Nestle, Nokia, Pernod Ricard, Sartorius, Renault
Inga Muller
19 Oct, 2023
Frankfurt
Benchmark indexes in Europe extended weekly losses and bond yields advanced to 12-year highs and the euro and the pound hovered near 6-month low.
The DAX index decreased 0.1% to 15,077.35, the CAC-40 index fell 0.5% to 6,929.24 and the FTSE 100 index fell 0.8% to 7,523.90.
The yield on 10-year German bonds increased to 2.93%, French bonds traded higher to 3.55%, the UK gilts edged up to 4.70% and Italian bonds eased to 4.99%.
Nestle SA decreased 2.2% to CHF 99.89 after the Swiss food company's nine-month sales growth disappointed investors.
Nokia Oyj dropped 6.0% to €3.07 after the company reported weaker-than-expected third quarter results and the company added it plans to trim its workforce.
The company said third quarter revenue declined 20% to 4.98 billion and net income plunged 69% to 133 million.
The company said it plans to eliminate as many as 14,000 jobs from the current 86,000 workforce base.
The latest job cut announcement follows the rival Ericsson's plan to cut 8,600 jobs after the U.S.-based carriers AT&T, T-Mobile and Verizon are slowing or cutting their infrastructure spending.
Hargreaves Lansdown PLC fell 4.5% to 704.50 pence after the retail financial services provider said client acquisition growth declined in the fiscal first quarter.
McBride Plc soared 19.5% to 38.86 pence after the U.K.-based household products maker said market momentum of the second-half fiscal 2023 continued in the fiscal 2024 first quarter.
Merck KGaA jumped 2.4% to €149.0 after the German pharmaceutical company forecasted sales growth to return in the fiscal 024 and the growth is expected to continue beyond 2025.
Sartorius AG decreased 1.2%to €208.0 after the German biotech company reported results for the first nine months of the year.
Pernod Ricard SA jumped 4% to €164.90 after the French wine and spirits maker forecasted higher sales in the fiscal 2024.
Renault SA dropped 6.7% to €33.74 after the French automaker said currency weakness in Turkey and Argentina weighed heavily on its sales growth in the third quarter.
European Stocks Face Headwinds After Mixed Earnings and Rising Bond Yields
Bridgette Randall
19 Oct, 2023
Frankfurt
Market indexes in Europe extended weekly losses after weak corporate results and rising bond yields compounded market anxieties.
The yields on government bonds advanced after the yield on 10-year U.S. Treasury notes approached 16-year high of 5%.
The yields on German bonds, French bonds and Italian bonds inched forward and hovered near the levels last seen in 2011.
Moreover, rising tensions in the Middle East also added to market jitters on the worries that Israel's aggressive response to Hamas-led attack and kidnappings may widen the conflict in the Middle East.
Widespread protests in Turkey, Iran, Iraq, Lebanon, Egypt and Malaysia and in Washington D.C and London called for immediate ceasefire and also put additional pressures on diplomats seeking a peaceful solution.
Palestinians feared that Israel's call for evacuation in north Gaza will be followed by a ground invasion and then confiscation of their land, the root cause of the seven-decade long conflict.
On the earnings front, weak results from Nokia, Nestle, Renault also weighed on the market sentiment.
Euro Area Current Account Surplus Expanded
The Euro Area current account surplus expanded in August after trade surplus rose, the European Central Bank reported Thursday.
The current account surplus increased to €28 billion from €21 billion in the previous month.
International goods trade surplus in the month rose to €35 billion from €25 billion but the service surplus narrowed to €6 billion from €10 billion in the previous month.
In the twelve months to August, the current account surplus rose to €126 billion, or 0.9% of the euro area GDP, from €12 billion surplus or 0.1% of GDP a year ago.
Europe Indexes & Yields
The DAX index decreased 0.1% to 15,077.35, the CAC-40 index fell 0.5% to 6,929.24 and the FTSE 100 index fell 0.8% to 7,523.90.
The yield on 10-year German bonds increased to 2.93%, French bonds traded higher to 3.55%, the UK gilts edged up to 4.70% and Italian bonds eased to 4.99%.
The euro hovered near a three-month low to $1.055, the British pound to $1.212 and the U.S. dollar fetched 89.72 Swiss cents.
Brent crude increased $1.22 to $90.29 a barrel and the Dutch TTF natural gas edged higher by €3.84 to €46.99 per MWh.
Europe Stock Movers
Nestle SA decreased 2.2% to CHF 99.89 after the Swiss food company's nine-month sales growth disappointed investors.
Nokia Oyj dropped 6.0% to €3.07 after the company reported weaker-than-expected third quarter results and the company also said it plans to trim its workforce.
Hargreaves Lansdown PLC fell 4.5% to 704.50 pence after the retail financial services provider said client acquisition growth declined in the fiscal first quarter.
McBride Plc soared 19.5% to 38.86 pence after the U.K.-based household products maker said market momentum of the second-half fiscal 2023 continued in the fiscal 2024 first quarter.
Merck KGaA jumped 2.4% to €149.0 after the German pharmaceutical company forecasted sales growth to return in the fiscal 024 and the growth is expected to continue beyond 2025.
Sartorius AG decreased 1.2%to €208.0 after the German biotech company reported results for the first nine months of the year.
Pernod Ricard SA jumped 4% to €164.90 after the French wine and spirits maker forecasted higher sales in the fiscal 2024.
Renault SA dropped 6.7% to €33.74 after the French automaker said currency weakness in Turkey and Argentina weighed heavily on its sales growth in the third quarter.
S&P 500 and Nasdaq Accelerated Declines After Treasury Yields Jumped to 16-year Highs
Barry Adams
18 Oct, 2023
New York City
After two hours of trading on Wall Street, benchmark indexes accelerated their declines and Treasury yields rebounded to 2007 highs.
Market mood soured after investors pored over details of the latest earnings reports and the rebound in bond yields put additional pressure on stocks.
Investors welcomed positive earnings from Procter & Gamble, United Airlines, JB Hunt and Morgan Stanley but cautious outlook turned several stocks volatile.
U.S. Treasury yields resumed their advances and the yield on 10-year U.S. Treasury notes inched higher to 4.8%, nearing the 2007-high.
Worries of another rate hike at the next meeting of policymakers and higher rates through 2024 dominated market sentiment for the second day in a row after retail sales advanced more-than-expected.
Moreover, the latest housing data confirmed that the U.S. economy is strong enough to withstand additional rate hikes, if policymakers decide to lift rates to bring down inflation to the target rate of 2%.
Despite several rate hikes over the last sixteen months, labor market conditions are still tight and inflation is still well above the Fed's target rate of 2%, and the latest rebound in crude oil prices added to market jitters.
Mortgage Applications Dropped to 28-year Low
Elevated interest rates continued to dampen demand for mortgage rates and applications for mortgages declined 6.9% from the previous week in the week ending on October 13.
The data from Mortgage Bankers Association showed that the demand for housing loans fell to the lowest level since 1995 and applications for home loan refinancing plunged 9.9%.
“Applications decreased to their lowest level since 1995, as the 30-year fixed mortgage rate increased for the sixth consecutive week to 7.70% – the highest level since November 2000,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.
Housing Starts and Permits Fell and Completions Rose In September
Housing starts and permits fell in September but completions rose from a year ago, according to the latest data released by the U.S. Census Bureau and the Department of Housing and Urban Development.
Building permits declined 4.2% from the previous month and dropped 7.2% from a year ago to a seasonally adjusted rate of 1.47 million.
Housing starts rose 7.0% from the previous month but fell 7.2% from a year ago to a seasonally adjusted rate of 1.358 million.
Housing completions rose 6.6% from the previous month and edged up 1.0% from a year to a seasonally adjusted rate of 1.453 million.
Volatile Crude Oil
Crude oil prices surged more than 2% as traders feared supply disruptions and Israel military's ground invasion in Gaza.
Diplomats in the region worry that Israel's reaction to Hamas' kidnapping and attacks may be perceived as aggressive by the militants in Lebanon, Iran and Egypt.
On Monday, an Israeli bombing campaign killed at least 500 people at a hospital in Gaza City, prompting worries of more retaliatory attacks from Hamas led militants.
Israel denied the attack and said that the explosion was linked to the mishandled rocket launch by Hamas-controlled operators.
Positive China Economic Data Surprised Markets
In Asia, China's economy expanded at 4.9% annual pace in the third quarter, slower than the 6.2% increase in the second quarter, National Bureau of Statistics reported Tuesday.
Economists were looking for the second quarter growth of 4.5%, and faster-than-expected growth raised hopes that the second largest economy may achieve the government' annual growth target rate of 5.0%.
China's retail sales rose at the fastest pace in four months in September by 5.5% after rising at 4.6% in the previous month, the statistical agency said in a separate report.
U.S. Indexes & Yields
The S&P 500 index decreased 0.2% to 4,364.92 and the Nasdaq Composite fell 0.4% to 13,515.26.
The yield on 2-year Treasury notes decreased to 5.20%, 10-year Treasury notes inched higher to 4.88% and 30-year Treasury bonds edged up to 4.97%.
Crude oil increased $1.25 to $87.86 a barrel and natural gas prices rose 7 cents to $3.15 a thermal unit.
The dollar index edged higher to 106.48, the level last seen in November 2022 and extended gains from the low of 99.85 on July 13, 2023.
U.S. Stock Movers
United Airlines Holdings Inc dropped 5.1% to $37.65 after the international airline forecasted weak performance in the current quarter largely because of expensive fuel.
Revenue in the third quarter rose to $14.5 billion from $12.9 billion and net income advanced 20% to $1.1 billion.
Morgan Stanley decreased 4.6% to $77.60 despite the financial services provider reporting higher-than-expected quarterly sales and earnings but revenue in wealth management unit disappointed investors.
Procter & Gamble Co increased 1.2% to $148.0 after the consumer goods maker reported quarterly earnings that surpassed estimates set by some analysts.
Revenue in the latest quarter was $21.9 billion and diluted earnings per share $1.83.
J B Hunt Transport Services Inc declined 3.6% to $188.80 after the logistics and transportation services provider reported quarterly earnings that fell short of market expectations.
Interactive Brokers Group, Inc dropped 4.5% to $82.51 after the online institutional brokerage service provider reported adjusted earnings and revenues that fell below market's expectations.
European Markets Trended Lower Amid Worries of Widening Conflict In Middle East
European markets trended lower in range bound trading and investors stayed focused on earnings releases.
In cautious trading, investors worried that the latest flare up between Israel and Hamas may widen to Iran, Lebanon, Turkey and Egypt and even draw neighboring oil producing nations.
Crude oil prices surged more than 2% as traders feared supply disruptions and Israel military's ground invasion in Gaza.
Closer to home on the economic front, the Eurozone annual inflation in September was 4.3%, weaker than 5.2% in August, Eurostat confirmed in its second estimate.
UK Inflation Held Steady In September
The U.K. inflation in September held steady at 6.7% after weaker food price inflation was overshadowed by a rebound in transportation costs.
The consumer price inflation held at18-month low after food prices rose at 12.1% compared to 13.7% in August and energy costs declined 0.2% compared to 3.2% fall in the previous month.
Core inflation, which excludes volatile food and energy prices, eased to 6.1% and fell to the lowest level since January.
Europe Indexes & Yields
The DAX index decreased 1.0% to 15,094.91, the CAC-40 index fell 0.9% to 6,965.97 and the FTSE 100 index fell 1.0% to 7,588.0.
The yield on 10-year German bonds increased to 2.87%, French bonds traded higher to 3.50%, the UK gilts edged down to 4.55% and Italian bonds eased to 4.91%.
The euro hovered near a three-month low to $1.055, the British pound to $1.217 and the U.S. dollar fetched 89.92 Swiss cents.
Brent crude increased $1.31 to $91.21 a barrel and the Dutch TTF natural gas edged higher by €1.04 to €49.94 per MWh.
Europe Stock Movers
Adidas AG increased 3.8% to €177.50 after the athletic shoemaker lifted its annual revenue outlook.
Just Eat Takeaway.com advanced 1.1% to €12.05 after the company raised its full-year adjusted operating earnings outlook.
ABB Ltd declined 6.1% to CHF 30.68 after the Swiss engineering company forecasted slower revenue growth in the fourth quarter.
TotalEnergies SE increased 0.9% to €63.76 and BP Plc advanced 0.7% to 559.10 pence after Brent crude oil prices soared 2% in London following the worries of a wider conflict in the Middle East.
China-linked luxury stocks in Paris advanced after China reported faster-than-expected economic growth in the third quarter and industrial output and retail sales were ahead of market's expectations.
LVMH edged up 0.02% to €668.50, Kering SA edged up 0.2% to €671.50 and Richemont SA was unchanged at €74.18.
Barratt Developments PLC dropped 3% to 410.94 pence after the UK-based home builder said new home bookings are likely to ease 10% in the fiscal first quarter.
Marshalls PLC jumped 4.6% to 207.20 pence after the concrete products maker reiterated its full-year outlook.