Earnings Optimism Keeps Wall Street Indexes Near Recent Highs

Alexander Garcia
28 Oct, 2024
New York City

Stock market indexes on Wall Street advanced after geopolitical tensions eased and investors awaited the release of earnings from leading technology companies. 

Investors are hoping that tech companies will reiterate their commitment to continue elevated levels of investments in artificial intelligence infrastructure, which could provide support for the Nasdaq to advance to higher highs. 

Last week, stocks faced headwinds on Wall Street as investors reviewed a flood of earnings for the second consecutive week.

About 30% of the S&P 500 companies have met or exceeded quarterly earnings expectations, setting the stage for market advance.

However, those upward moves were kept in check after bond yields jumped to a three-month high as investors scaled back expectations of additional aggressive rate cuts.

In the busy week ahead, U.S. investors are ready to review non-farm payrolls, the JOLTS job report, the third quarter GDP growth estimate, and the PCE inflation report.

Investors are also looking forward to quarterly results from five of the seven megacap tech stocks, including quarterly releases from Apple, Alphabet, Amazon, Microsoft, and Meta Platforms. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.4% to 5,828.94, the Nasdaq Composite rose 0.5% to 18,609.79, and the Russell 2000 index advanced 1.6% to 2,244.21. 

For the year so far as of Friday's closing, the S&P 500 index is up 22.5%, the Nasdaq Composite has advanced 25.4%, and the Russell 2000 index has gained 9.7%. 

The yield on 2-year Treasury notes edged higher to 4.12%, 10-year Treasury notes inched down to 4.26%, and 30-year Treasury bonds inched higher to 4.52%.

WTI crude oil decreased $4.15 to $67.62 a barrel, and natural gas prices edged down 26 cents to $2.29 a thermal unit.

Gold fell by $5.61 to $2,742.02 an ounce, and silver increased by $0.06 to $33.79.

The dollar index, which weighs the US currency against a basket of foreign currencies, edged lower to 104.27.

 

U.S. Stock Movers

Energy stocks traded lower after Israel and Iran avoided escalating war after Israel struck Iran's military facilities and avoided oil and nuclear targets over the weekend. 

ExxonMobil declined 1.6% to $116.36, Chevron decreased 2.2% to $147.47, and Marathon Oil dropped 3.3% to $25.58. 

Tech stocks were in focus ahead of closely watched quarterly earnings from leading companies. 

Apple increased 0.6% to $232.90, Alphabet advanced 2% to $168.56, Amazon.com Inc. gained 0.9% to $189.54, Meta Platforms jumped 1.8% to $581.30, and Microsoft inched higher 0.9% to $431.83. 

Boeing declined 1.3% to $153.08 after the embattled aviation company launched an offering to raise as much as $19 billion. 

The company is looking to sell 90 million shares and $5 billion of mandatory convertible securities. 

The commercial plane maker and defense contractor has struggled to stem cash outflow after 33,000 workers struck in September, halting production, including popular 737 Max aircraft. 

McDonald's Corp. decreased 2.7% to $299.0 after the company ruled out the outbreak of E. coli linked to the company's Quarter Pounders. The company said it plans to resume selling quarter pounders at impacted restaurants as early as this week. 

 

European Markets On Hold Ahead of Busy Week of Earnings

European markets erased early gains in Monday's trading, and investors turned cautious in a busy week of earnings and economic releases. 

Benchmark indexes in Paris, London, Milan, and Frankfurt traded around the flatline as investors looked for clues about the amount and timing of possible rate cuts by the European Central Bank. 

Investors are expecting the eurozone GDP in the third quarter to expand by 0.2%, and consumer inflation in October is likely to hover near 1.8%.

Investors anticipated third-quarter GDP in France and Italy to grow by a fraction but contract by 0.3% in Germany. 

Economists are anticipating unemployment in the Euro Area to stay near the record level of 6.4%.

In the U.K., the new Labour government is scheduled to announce its budget on October 30, as the finance minister plans to increase the borrowing limit to finance infrastructure investment.

 

Spain's Retail Sales Soar In September

In other economic news, Spain's retail sales increased 4.1% from a year ago in September, following an upwardly revised 2.4% in the prior month, according to the National Statistics Institute. 

Retail sales rose at the fastest pace since March 2023, after nonfood sales advanced 4.8% from a year ago. 

 

Europe Indexes and Yields

The DAX index increased by 0.3% to 19,529.81; the CAC-40 index rose by 0.8% to 7,556.94; and the FTSE 100 index advanced by 0.5% to 8,285.68. 

The yield on 10-year German bonds edged higher to 2.27%, French bonds inched higher to 3.01%, the UK gilts edged down to 4.21%, and Italian bonds decreased to 3.49%.

The euro edged lower to $1.08; the British pound inched higher to $1.29; and the U.S. dollar strengthened to 86.62 Swiss cents.

Brent crude decreased $4.29 to $71.75 a barrel, and the Dutch TTF natural gas fell by €1.03 to €42.58 per MWh. 

Crude oil prices fell as much as 5% after Israel and Iran walked away from escalating tensions and avoided a regional war. 

Middle East tensions deescalated after last week Israel struck Iran's military facilities but avoided striking Iran's oil infrastructure and nuclear facilities, and Iran avoided vowing to retaliate. 

 

Europe Stock Movers

Energy stocks traded lower after Israel and Iran avoided a possible regional war. 

BP plc declined 2.1% to 396.60 pence, Shell PLC dropped 2.2% to 2,493.81 pence, and TotalEnergies SE eased 1.9% to €59.14. 

Philips NV plunged 17.5% to €24.30 after the medical device and equipment company lowered its annual sales outlook, citing a deteriorating demand from hospitals and consumers in China. 

KPN NV dropped 1.7% to €3.70 despite the Dutch telecom carrier reiterating its annual outlook. 

Travel and leisure stocks traded higher after crude oil prices eased. 

Deutsche Lufthansa AG increased 1.9% to €6.85, Air France advanced 2.3% to €9.34, and International Consolidated Airlines Group gained 0.9% to 213.50 pence. 

 

Yen to Test Lower Lows After Voters In Japan Wipe Out Ruling Coalition's Majority 

Stock market indexes in Tokyo closed higher after a day of volatile trading following a stinging defeat of the ruling coalition block. 

The Nikkei 225 stock average jumped 1.8%, the broader Topix index advanced 1.5%, and the yen weakened to 153.67 against the U.S. dollar. 

Japan heads for unprecedented political instability after the ruling coalition of the Liberal Democratic Party and Komeito lost their strong majority in the lower house of the parliament in Sunday's national election.

In the 465-member lower house of the parliament, a majority of 233 is needed to form the next government or pass any bill in the chamber.

The Liberal Democratic Party reduced its seat in the house to 179 from 247, and Komeito weakened its count to 24 from 32. 

The Constitutional Democratic Party increased its lawmakers counts to 148, a sharp jump from 98; the Japan Innovation Party increased its tally to 48; and the Democratic Party for the People added seats to total 28 from 7. 

For nearly seven decades, the Liberal Democratic Party has governed Japan, except between 2009 and 2012 and between 1993 and 1994. 

The LDP was under pressure after the widespread slush fund scandal put the party in harsh light with voters.

Voters lacked enthusiasm and directed their anger at the established political order following the rising prices over the three years and stagnant wages for more than two decades. 

The political upheaval is likely to add another layer of complexity as the Bank of Japan prepares to wean off Japan's economy from two decades of low interest rates. 

The Bank of Japan is expected to leave its monetary policy and interest rates unchanged at the end of its policy meeting on Thursday, but the latest political outcome is likely to complicate the central bank's monetary policy plans. 

 

Japan Stock Movers 

The Nikkei 225 Stock Average closed up 1.8% to 38,605.53, and the broader Topix index edged higher 1.5% to 2,657.78. 

In Monday's trading, tech stocks, banks, and industrial stocks traded volatile. 

Advantest Corp. gained 4.6% to ¥8,181.0, Tokyo Electron advanced 2.8% to ¥23,860.0, Lasertec added 4.8% to ¥22,270.0, and Disco Corp. increased 5.3% to ¥39,670.0. 

Mitsubishi UFJ Financial added 0.9% to ¥1,562.0, Sumitomo Mitsui Financial increased 1.8% to ¥3,160.0, and Mizuho Financial gained 1% to ¥3,115.0. 

Toyota Motor Corp gained 4.2% to ¥2,707.0, Honda Motor advanced 4% to ¥1,582.0, and Nissan Motor increased 3.5% to ¥409.80. 

IHI Corp. decreased 1.1% to ¥7,680.0, Panasonic Holdings rose 1.3% to ¥1,244.50, and Fanuc Corp. added 3.1% to ¥4,016.0. 

 

China Sets Date to Propose Budgetary Measures

Stocks in China and Hong Kong lacked direction as investors awaited the release of fiscal measures early next week. 

The Hang Seng index increased 0.4% and the CSI 300 index decreased 0.2% after the legislative committee of the National People's Congress scheduled a meeting next month. 

The committee plans to meet between November 4 and 8 as lawmakers review government finances and increase the borrowing limit to finance additional measures to provide additional economic stimulus support. 

Investors are hoping that the committee will approve at least 2 trillion yen of support to revive local government financing, among other measures, to facilitate property market transactions and bolster flailing consumer confidence. 

The meeting will also review possible escalation of tariffs on China-made products exported to the U.S. after the presidential election on November 5. 

Market sentiment was also dented after the decline in profits at large industrial companies fell at a faster pace in September, the National Bureau of Statistics reported Sunday. 

Profits declined 27% from a year ago compared to a decline of 18% in August, amid a worsening economic environment and a weakening outlook. 

For the nine-month period ending in September, profit declined 3.5% from a year ago. 

Oil exploration companies declined after crude oil prices in international trading fell over 4% following the easing of tensions in the Middle East as Israel avoided wider military conflict. 

 

China Stock Movers 

The Hang Seng index increased 0.4% to 20,661.85 and the mainland-focused CSI 300 index decreased 0.2% to 3,948.17. 

PetroChina declined 2% to HK $5.93, and China Petroleum and Chemical Corp fell 1.5% to HK $4.49 following the decline in crude oil prices in international trading. 

Alibaba Group Holding gained 2.8% after the e-commerce company agreed to pay $433 million to settle a shareholder class action lawsuit in the U.S. 

BYD increased 0.8% to HK $295.0, Li Auto rose 1.1% to HK $112.50, and Xpeng advanced 8.2% to HK $45.20.