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.