Rate Worries and Lackluster Earnings Hobble Global Markets

Alexander Garcia
24 Oct, 2024
Miami

Benchmark indexes on Wall Street lost early momentum and struggled to stay above the flatline as investors reviewed a batch of lackluster earnings. 

The S&P 500 index added 0.2% and the Nasdaq Composite gained 0.6% as investors reviewed the fresh batch of earnings. 

Tesla, UPS, Lam Research, and Whirlpool advanced after reporting quarterly results that met or exceeded investor expectations. 

Yield on 10-year Treasury notes edged slightly higher and stayed near a three-month high of 4.24% as investors dialed down their expectations of another aggressive rate cut at the next two-day policy meeting ending on November 7. 

About 170 companies so far in the S&P 500 index have reported quarterly results, and nearly 150 have either met or surpassed analysts' estimates, according to the data compiled by Ticker.com. 

Banks, financial brokers, and industrial and consumer product makers have generally reported higher earnings and sales in their latest quarter. 

About 400 companies are scheduled to report their quarterly results next week. 

Initial weekly jobless claims declined 15,000 to 227,000 during the week ending on October 19, the lowest in three weeks, according to the data released by the Department of Labor. 

Continuing jobless claims, which lags by a week, were 1.897 million, an increase of 28,000 from the previous week's revised level, and rose to the highest level since November 13, 2021, when it was 1.974 million. 

 

U.S. New Home Sales Jump In September 

Single-family home sales in September increased 6.3% from a year ago to a seasonally adjusted annual rate of 738,000, according to an estimate released by the U.S. Census Bureau. 

Home sales rose 4.1% from the previous month, the highest level since May 2023, following a downwardly revised 709,000 in August. 

The median price of a new home increased to $426,300 from $426,100, and the average price decreased to $501,000 from $515,000 a year earlier, respectively. 

The seasonally adjusted estimate of new houses for sale at the end of September was 470,000, representing a supply of 7.6 months at the current sales rate. 

Sales decreased 22.2% in the Northeast to 28,000 and declined 10.9% in the West to 156,000, but rose 14.9% to 77,000 in the Midwest and increased 14.7% to 477,000 in the South. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.2% to 5,806.38, the Nasdaq Composite rose 0.6% to 18,379.73, and the Russell 2000 index decreased 0.3% to 2,207.53. 

For the year so far as of Wednesday, the S&P 500 index is up 22.2%, the Nasdaq Composite has advanced 23.8%, and the Russell 2000 index has gained 9.9%. 

The yield on 2-year Treasury notes edged higher to 4.07%, 10-year Treasury notes inched up to 4.22%, and 30-year Treasury bonds inched higher to 4.50%.

WTI crude oil decreased $0.78 to $69.98 a barrel, and natural gas prices edged up 9 cents to $2.43 a thermal unit.

Gold fell by $17.31 to $2,734.67 an ounce, and silver decreased by $0.24 to $33.59.

The dollar index, which weighs the US currency against a basket of foreign currencies, edged higher to 104.19.

 

U.S. Stock Movers

IBM declined 4.2% to $223.01 after the technology company reported weaker-than-expected revenue in the third quarter. 

Tesla Inc. jumped 15.6% to $249.57 after the electric vehicle maker reported better-than-expected profit in the third quarter. 

Boeing declined 1.9% to $154.15 after workers rejected a wage agreement between the machinists' union and the aviation company, extending the 5-weeklong strike. 

United Parcel Service increased 6.2% to $139.19 after the company reported better-than-expected third quarter earnings and revenue. 

Lam Research Corporation increased 3% to $75.10 after the advanced semiconductor equipment maker's earnings surpassed market expectations. 

 

European Markets Halt 3-Day Slide After Positive Quarterly Results, Renault and Barclays Shine 

European markets advanced in Thursday's trading as investors reacted positively to the latest batch of quarterly results. 

Benchmark indexes in Paris, London, Frankfurt, and Milan edged higher, and bond yields in the region hovered at a two-month low. 

Unilever, Renault, Sodexo, Danone, Symrise, Beiersdorf, Michelin, Indivior, Barclays, and Essentra traded higher after positive quarterly results. 

On the economic front, investors reviewed the latest update on business activity in the Euro Area. 

The HCOB Flash Eurozone Composite PMI inched up to 49.7 in October from a seven-month low of 49.6 in September, according to the latest data from S&P Global. 

Service sector activity growth eased slightly and manufacturing downturn softened in the month, driven by a soft demand outlook as new orders declined for the fifth month in a row. 

In Asia, market indexes in China declined after investors turned skeptical about the size of the possible fiscal stimulus and the lack of near-term catalysts for earnings. 

Benchmark indexes in Japan struggled to stay above the flatline ahead of the national election this Sunday, and the ruling Liberal Democratic Party may lose its majority. 

In New York, bond yields rose to a three-month high as traders scaled down bets for an aggressive interest rate cut over the remaining two policy meetings in 2024 amid robust economic data and stable labor market conditions. 

 

Europe Indexes and Yields

The DAX index increased by 0.4% to 19,443.0; the CAC-40 index rose by 0.3% to 7,530.28; and the FTSE 100 index advanced by 0.1% to 8,269.38. 

The yield on 10-year German bonds edged lower to 2.26%, French bonds inched higher to 2.98%, the UK gilts edged up to 4.23%, and Italian bonds decreased to 3.46%.

The euro edged lower to $1.08; the British pound inched higher to $1.29; and the U.S. dollar strengthened to 86.54 Swiss cents.

Brent crude decreased $0.73 to $74.21 a barrel, and the Dutch TTF natural gas rose by €0.86 to €42.32 per MWh. 

 

Europe Stock Movers

Barclays PLC jumped 3.9% to 247.40 pence after the UK-based bank reported better-than-expected third quarter results. 

Indivior PLC jumped 10% to 722.0 pence after the UK-based pharmaceutical company reported strong third-quarter results. 

Essentra PLC rose 0.8% to 152.20 pence after the essential components manufacturer reiterated that adjusted operating earnings in the fiscal year 2024 would be in line with market expectations. 

Anglo American plc advanced 4.3% to 2,422.50 pence after the resource company raised its annual production outlook for platinum and nickel.

The company estimated platinum production to reach between 3.7 and 3.9 million ounces and nickel production to advance to 38,000 to 39,000 tons, backed by stable production conditions at its mines in Brazil. 

Abrdn dropped 9.3% to 148.75 pence after the Scottish asset management company reported a larger-than-expected fund outflow in the third quarter. 

Renault SA gained 6.5% to €42.95 after the French automaker reported a rise in sales in the third quarter and reiterated its annual outlook. 

Hermes International jumped 1.6% to €2,093.0 after the French luxury goods maker reported an 11.3% increase in sales in the third quarter. 

Danone SA gained 2.4% to €65.50 after the French dairy product maker reported higher-than-expected organic sales growth in the third quarter. 

Michelin SA declined 5.7% to €31.87 after the French tire maker lowered its annual sales volume outlook. 

 

Japan Heads for Post-Election Chaos as Leading Parties Struggle to Win Voter's Attention 

Investors remained cautious in Tokyo ahead of the general election this Sunday, and the yen hovered near a three-month low. 

The Nikkei 225 stock average and the broader Topix index lacked direction and traded around the flatline amid uncertainty about the outcome of the national election. 

The Liberal Democratic Party is struggling to win voters' attention, and the party may struggle to return to power for the first time in several years. 

465 seats are up for grabs in Japan's lower house election, and the latest poll suggest that the ruling LDP party may lack enough seats to win outright majority. 

LDP may lose its majority of 247 seats, and polls suggest that the corruption-tainted party may win as few as 199 seats. 

The election uncertainty and the possible chaos in the aftermath are keeping foreign investors on the sidelines. 

On the economic front, Japan's private sector activities contracted for the first time in four months in October. 

The Au Jibun Japan Manufacturing PMI eased to 49.0 in October from 49.7 in September, and the services index slipped to 49.3 from 53.1, respectively. 

The service industry index contracted for the first time in four months and fell to the lowest level since February 2022 as domestic and international customers held orders amid economic weakness. 

 

Japan Stock Movers 

The Nikkei 225 Stock Average increased 0.3% to 38,195.56, and the broader Topix index added 0.03% to 2,637.77.

The yen traded at 152.22 against the U.S. dollar ahead of election uncertainty, as leading parties are likely to have enough votes to form the next government. 

Tokyo Electron increased 1.2% to ¥23,025.0, Advantest gained 2.3% to ¥8,053.0, and Lasertec Corp. jumped 2% to ¥21,460.0. 

Marubeni Corp. declined 0.8% to ¥2,338.0, Mitsui & Company decreased 0.2% to ¥3,100.0, and Itochu Corp. fell 0.6% to ¥7,554.0. 

Konica Minolta advanced for the second day in a row and jumped 5.2% to ¥561.20, IHI Corp. added 2.6% to ¥7,750.0, and the video game arcade operator Bandai Namco increased 3.3% to ¥3,197.0. 

 

China Stocks Lack Near-term Catalysts to Support Recent Market Surge 

Stock market indexes in China and Hong Kong eased as investors booked profit for the second day in a row. 

The Hang Seng and CSI 300 indexes fell 1% as investors debated the size of the fiscal stimulus and its effectiveness on corporate earnings. 

The mainland-focused CSI 300 index has jumped 35% over the three-week period to October 8; however, the market index has eased over the last two weeks.

The package of monetary stimulus measures is not strong enough to lift earnings in the near future, which could force investors to wait six months before the first evidence of earnings is available. 

Moreover, additional large fiscal measures are not likely to be released after the U.S. presidential election on November 5, because a change in leadership could have a significant impact on the relationship between the U.S. and China. 

In addition, earnings growth in the third and fourth quarters is likely to be weak and not provide much-needed support for the indexes to advance further from the current level. 

Investors are likely to see the impact of monetary policy measures announced by the People's Bank of China only in the first quarter of 2025, testing the patience of investors in the near future. 

Market sentiment in Hong Kong was further dented after investors lowered their expectations of aggressive rate cuts in the U.S. over the remaining two policy meetings in 2024.

The S&P 500 index and the Nasdaq Composite dropped as much as 1.5% in overnight trading in New York as yield on 10-year Treasury notes advanced to a 3-month high of 4.27%, following a string of robust economic data flows and worry about the growing budget deficit. 

 

China Stock Movers 

The Hang Seng Index declined 1.1% to 20,507.18 and the CSI 300 index dropped 1% to 3,931.11. 

Sands China increased 2.7% to HK $19.16 after the casino operator in Macau reported a 16% rise in earnings in the third quarter. 

Horizon Robotics soared to HK $4.38 after the autonomous driving technology firm priced its initial public offering at HK $3.99 per share and raised US$696 million. 

The company sold 1.355 billion shares, and its Hong Kong tranche of 203.7 million shares was oversubscribed by 33.8 times and its international tranche of 1.15 billion by 13.8 times. 

Baillie Gifford Overseas Limited, an associate of Scottish Mortgage Investment Trust plc, will retain a stake of 3.89% in the company after the global offering. 

Alibaba Group declined 3.7% to HK $93.70, Tencent Holdings dropped 1.7% to HK $420.80, and JD.com Inc. fell 2.8% to HK $154.60.