S&P 500 and World Markets Hover Near Recent Highs as Investors Focus On Earnings

Alexander Garcia
16 Oct, 2024
Miami

Stocks on Wall Street edged slightly higher as benchmark indexes attempted to surpass previous record highs set earlier in the week. 

The S&P 500 index edged up 0.2%, the tech-heavy Nasdaq Composite index increased 0.1%, and the Russell 2000 traded at a new intraday high. 

Investors have been bidding up stocks after payrolls expanded at a faster-than-expected pace in September and inflation continued to trend lower toward the Fed's target rate of 2%. 

Moreover, investors returned to add positions to artificial intelligence-linked stocks amid a growing appetite for risky stocks. 

Market sentiment further improved after Goldman Sachs, Bank of America, and Citigroup reported earnings exceeding market expectations. 

Earnings beat from Morgan Stanley and United Airlines also supported broader market levels in Wednesday's trading. 

Crude oil prices hovered near two-week lows as rising global supply outweighed elevated Iran-Israel tensions, denting stocks in the energy sector for the third day in a row. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.2% to 5,828.11, the Nasdaq Composite rose 0.1% to 18,319.36, and the Russell 2000 index advanced 1.6% to 2,287.11. 

The yield on 2-year Treasury notes edged lower to 3.93%, 10-year Treasury notes inched down to 4.01%, and 30-year Treasury bonds inched higher to 4.29%.

WTI crude oil decreased $0.11 to $70.46 a barrel, and natural gas prices edged down 10 cents to $2.39 a thermal unit.

Gold rose by $11.13 to $2,671.38 an ounce, and silver increased by $0.26 to $31.71.

The dollar index, which weighs the US currency against a basket of foreign currencies, edged higher to 103.27.

 

U.S. Stock Movers

United Airlines rose 7.5% to $68.90 after the company announced a stock repurchase plan as part of its quarterly earnings update. 

The airline said it plans to buyback up to $1.5 billion of its stock and warrants originally issued to the U.S. Treasury, the first such purchase since before the COVID-19 pandemic. 

In the quarter, the company repurchased in the open market just over 2 million shares of its common stock in connection with the exercise of roughly 6.4 million warrants issued to the U.S. Treasury under the CARES Act and Payroll Support Program.

The company repurchased shares at an average price of $39.99. 

The repurchase of these shares eliminated the dilution associated with the warrants exercised and are separate from the new stock repurchase plan of $1.5 billion. 

Revenue in the third quarter increased 2.5% to $14.8 billion from $14.5 billion, net income declined 15.1% to $965 million, and diluted earnings per share dropped to $2.90 from $3.42 a year ago. 

Morgan Stanley increased 7.5% to $120.50 after the financial services company reported better-than-expected revenue and earnings in the third quarter. 

Revenue increased to $15.4 billion from $13.3 billion, net income advanced to $3.2 billion from $2.4 billion, and diluted earnings per share rose to $1.88 from $1.38 a year ago. 

Revenue in the institutional securities division increased to $6.8 billion from $5.7 billion, wealth management jumped to $7.2 billion from $6.4 billion, and investment management advanced to $1.5 billion from $1.3 billion a year ago. 

The wealth management unit attracted $64 billion in new assets, increasing total client assets to $6 trillion. 

Investment management unit received a net long-term asset flow of $7 billion, and assets at the end of the quarter increased to $1.6 trillion. 

 

European Markets Faced Headwinds After LVMH Sales Dropped

European markets traded down ahead of the rate decisions from the European Central Bank, and weak results from two leading companies compounded market anxieties. 

Benchmark indexes in London, Paris, and Frankfurt traded down ahead of the interest rate decisions from the European Central Bank on Thursday. 

The European Central Bank is widely expected to cut rates for the third time this year amid deteriorating economic conditions and a weakening inflation outlook. 

Inflation in the eurozone peaked at 10.6% in October 2022 and has steadily declined to an annual 1.8% in September, below the central bank's targe rate of 2%. 

This decline in overall inflation is primarily driven by the fall in energy prices, but core inflation, which excludes food and energy prices, remained at 2.7% and service inflation stayed at 4%. 

 

UK Consumer Price Inflation Eased In September 

Separately, the UK's overall inflation decreased to 1.7% in September, the lowest since April 2021, after staying at 2.2% in the previous two months, the Office for National Statistics reported Wednesday. 

The core rate of inflation, which excludes food and energy prices, decreased to an annual rate of 3.2% in September from 3.6% in the previous month. 

Core inflation dropped to the lowest level since September 2021. 

 

Europe Indexes and Yields

The DAX index decreased by 0.3% to 19,432.81; the CAC-40 index fell by 0.4% to 7,492.0; and the FTSE 100 index rose by 0.9% to 8,329.07. 

The yield on 10-year German bonds edged lower to 2.19%, French bonds inched lower to 2.93%, the UK gilts edged down to 4.09%, and Italian bonds decreased to 3.42%.

The euro edged lower to $1.08; the British pound inched higher to $1.29; and the U.S. dollar strengthened to 86.23 Swiss cents.

Brent crude decreased $0.01 to $74.25 a barrel, and the Dutch TTF natural gas fell by €0.62 to €39.47 per MWh. 

 

Europe Stock Movers

LVMH declined 3.7% to €601.20 after the fashion and leather goods company reported a drop in third quarter sales and warned of an "uncertain" outlook. 

Overall sales declined 2% to €60.7 billion from €62.2 billion, driven by a 11% fall in wine & spirit sales to €4.2 billion, fashion & leather goods sales by 3% to €29.9 billion, and watches & jewelry sales by 5% to €7.5 billion. 

However, perfumes and cosmetic sales increased 2% to €6.1 billion. 

The luxury goods company blamed the sales weakness to challenges in China following "several years of exceptional post-Covid growth."

Other luxury goods makers declined following the LVMH announcement: Kering SA fell 2%, Hermes International declined 1.3%, L'Oreal dropped 2%, and Brunello Cucinelli S.p.A. eased 0.8%. 

ASML Holding declined 2.5% to €651.0 after dropping as much as 15% in the previous session following the company's sales warning. 

Rexel SA dropped 3.9% to €25.28, and the French distributor of electric supplies cut its 2024 outlook, citing challenging market conditions in Europe. 

Stellantis NV declined 1.3% to €11.87 after the Italy-based vehicle maker reported a 20% decline in shipment in the third quarter. 

Just Eat Takeaway.com declined 2.9% to €12.0, and the food delivery company reported a decline in orders in the third quarter. 

Hammerson plc rose 3.5% to 320.20 pence after the property developer launched a £140 million stock repurchase plan. 

Antofagasta jumped 2.8% to 1,847.0 pence after the Chile-based mining company reported a 15% increase in copper production. 

 

Japan's Nikkei 225 Drops 2%

Benchmark indexes in Tokyo dropped sharply, tracking losses in overnight trading in New York. 

The Nikkei 225 stocks average plunged nearly 2%, and the broader Topix index fell more than 1% after tech and energy stocks dropped in New York. 

The S&P 500 index declined 0.8% and the Nasdaq Composite fell 1.1% after the Dutch equipment maker ASML Holding said demand recovery is more gradual than previously estimated. 

Following the ASML's revised outlook, AMD, Nvidia, Broadcom, and Micron Technology declined between 4% and 7%. 

ASML revised its annual revenue estimate to range between Є30 billion and Є35 billion, near the low end of its previous annual outlook. 

The company said net sales in the September quarter were Є7.5 billion and new orders were Є2.6 billion, sharply lower than previously estimated. 

Crude oil plunged 5% after supply-demand imbalances overshadowed Iran-Israel tensions. 

Energy stocks continued to fall after crude oil prices extended losses for the third consecutive day amid worry of lack of demand growth from China and rising supply in the Middle East. 

On the economic front, Japan's core machinery orders, which exclude large and volatile orders for ships and power plants, decreased 1.9% to 858.9 billion yen. 

On an annual basis, private sector machinery orders fell 3.4% in August from a year ago, according to the data released by the Cabinet Office. 

The orders declined for the fifth month in 2024 as orders for manufacturing fell by 2.5% to 388.4 billion yen. 

The yen drifted lower to 149.26 against the U.S. dollar amid rising expectations of the Bank of Japan holding its interest rate steady at the next policy meeting. 

 

Tokyo Metro IPO Raises $2.3 Billion

Tokyo Metro priced its shares at 1,200 yen, and the company plans to list its shares on October 23. 

The widely anticipated public offering was oversubscribed more than 10 times, according to a report by Reuters. 

The local rail service company is planning to sell 290.5 million shares. 

The company is estimating annual revenue in the current fiscal year ending in March 2025 of 407.5 billion and net income of 52.3 billion yen. 

The company is also planning to pay a cash dividend of 40 yen per share from earnings per share of 90.02 yen. 

The Tokyo Metropolitan Government controls 46.6%, and Japan's central government holds the remaining 53.4% stake in the local railroad company. 

 

Japan Stock Movers 

The Nikkei 225 Stock Average decreased 1.7% to 39,225.70, and the broader Topix index dropped 1% to 2,695.51. 

Tech stocks plunged following the sharp decline in leading chipmakers in overnight trading in New York. 

Tokyo Electron dropped 9.2% to ¥24,310.0, Advantest fell 7% to ¥7,865.0, Disco Corp. plunged 5.7% to ¥36,160.0, and Lasertec declined 13.4% to  ¥22,155.0. 

East Japan Railway Company increased 0.1% to ¥2,974.0, West Japan Railway Company decreased 0.8% to ¥2,774.0, and Kyushu Railway fell 2.2% to ¥4,067.0. 

Seven & I Holdings decreased 2.7% to ¥2,224.50, Isetan Mitsukoshi fell 6.6% to ¥2,353.50, and Fast Retailing added 0.1% to ¥53,580.0. 

 

China Prepares to Raise Debt Limit Ahead of Anticipated Fiscal Measures 

Stocks in Hong Kong and mainland China diverged as investors debated future policy measures following the recent economic reports. 

The Hang Seng index rebounded 0.9% after falling 4.4% in the previous two sessions, and the CSI index decreased 0.3%. 

Market sentiment remained weak after policymakers failed to follow through again with specific measures, following the top politicians promising "whatever it takes" measures to revive consumer spending. 

In a familiar pattern witnessed over the last four years, Chinese politicians make big announcements that are not always followed by specific measures to support the property market and revive consumer sentiment. 

Foreign investors are increasingly skeptical about the Chinese leadership's commitment to supporting the annual economic growth target of 5%. 

Moreover, investors are dialing down annual growth expectations for the current year to below 5% and to close to 4% in 2025 as the government struggles to address structural issues amid high and rising government debt. 

Despite the bold and strong rhetoric from China's politburo, the world's second-largest economy is steadily drifting to a slower annual economic growth rate nearing 2% over the next three years. 

Persistent decline in property market valuations, elevated youth unemployment, and steady outflow of foreign investors are overshadowing China's success in exporting renewable energy products, electric vehicles, and consumer electronics. 

Investors looked forward to comments from the housing secretary on Thursday and held out for measures to arrest the four-year property market malaise. 

China's policymakers are also considering to raise debt by as much as 4 trillion yen that will facilitate exchanging local government debt and support the purchase of residential properties.

China's central government and local government debt is estimated to surpass at least 120% of gross domestic product, a sharp rise over the last five years.

 

China Stock Movers 

The Hang Seng index increased 0.9% to 20,501.77, and the mainland-focused CSI 300 index fell 0.3% to 3,846.57. 

Alibaba Group increased 0.5% to HK $100.40, Tencent Holding added 2% to HK $425.40, and JD.com fell 2.2% to HK $156.90. 

Residential property developers rebounded ahead of comments from the housing secretary on Thursday.

Longfor Group rebounded 9.2% to HK $13.98, China Resources Land gained 5% to HK $27.40, and China Vanke increased 14.6% to HK $7.66. 

BYD declined 0.8% to HK $273.40, Li Auto added 0.3% to HK $98.85, and Xpeng fell 1.4% to HK $43.85. 

Qiniu Limited plunged as much as 50% in its Hong Kong debut after the cloud services provider priced its initial public offering at HK $1.38 per share. 

Zhonghang Shangda Superalloys soared more than 10-fold in Shenzhen trading after the company priced its initial public offering at 6.88 yuan per share.