S&P futures little changed in Tuesday morning trading. Comes after US equities finished higher to start the week with S&P 500 notching its 46th ATH of 2024. However, some focus on very light volumes. Tech a standout on semi strength, while utilities also rallied more than 1%. Treasuries firmer with curve flattening. Dollar index down 0.2%. Gold up 0.2%. Bitcoin futures off 0.5%. WTI crude down nearly 5% on latest geopolitical headlines.
US equities closed higher on Monday, with the Dow up 0.47%, the S&P 500 rising 0.77%, the Nasdaq gaining 0.87%, and the Russell 2000 increasing 0.64%.
The S&P 500 reached a new closing high, while the Nasdaq is now less than 1% below its July 10 all-time high. Big tech stocks were mostly up, with NVIDIA leading the pack. Other outperforming sectors included semiconductors, homebuilders, banks, insurers, airlines, payments, and utilities. Laggards included energy, chemicals, grocers, tobacco, retail, machinery, and Chinese tech stocks. Treasuries were closed for the Columbus Day holiday after last week’s sharp rise in rates. The Dollar Index was up 0.3%, gold fell 0.4%, Bitcoin futures surged 4.6%, and WTI crude dropped 2.3%.
The start of the week was quiet due to the bond-market holiday and limited earnings reports, with investors waiting for key macroeconomic data later in the week. Drivers of the market’s upside included optimism around soft-/no-landing economic scenarios, a low bar for Q3 earnings, favorable seasonality, and the reopening of the buyback window. However, concerns about high valuations, election uncertainty, Fed rate expectations, rising bond yields, and elevated volatility (VIX) persist. Weekend headlines highlighted China’s Ministry of Finance briefing, softer economic data, and political updates in the US.
There was some Fed commentary. Minneapolis Fed’s Kashkari said the economy is in the final stages of bringing inflation back to 2%, though more rate cuts could be necessary, depending on economic conditions. Governor Waller discussed scenarios for inflation and interest rates but maintained a cautious outlook, with plans for gradual rate cuts over the next year. No major economic data was released on Monday, but Thursday will be a key day with reports on retail sales, jobless claims, industrial production, and the housing market.
In corporate news, earnings season will pick up this week with 43 S&P 500 companies, representing around 9% of market cap, set to report. The blended earnings growth rate for the S&P 500 stands at 4.1%, marking a fifth consecutive quarter of positive year-over-year growth. Starbucks is reportedly scaling back discounts, and Boeing remains in focus with its negative Q3 preannouncement and plans for a 10% workforce reduction. Other headlines include Riley Financial selling its Great American unit to Oaktree Capital for $386 million and Longboard Pharmaceuticals being acquired for $60 per share. Key earnings reports tomorrow include Bank of America, Johnson & Johnson, Goldman Sachs, Citigroup, UnitedHealth, and Charles Schwab.
Equity Movers by Sector:
Health Care
- Longboard Pharmaceuticals (LBPH-US) +51.7%: To be acquired by H. Lundbeck A/S for ~$2.6B in cash ($60/share), representing a 54% premium; deal expected to close in Q4.
- UnitedHealth (UNH-US): Major earnings report expected tomorrow.
Financials
- B. Riley Financial (RILY-US) +23.5%: Confirmed it will sell its Great American Group unit to Oaktree Capital for ~$386M, receiving ~$203M in cash and a minority stake in the new holding company.
- SoFi Technologies (SOFI-US) +11.4%: Announced a $2B loan platform business agreement with Fortress, expected to enhance its loan platform capabilities.
- Affirm Holdings (AFRM-US) +4.6%: Upgraded to neutral from underperform at Wedbush, citing a favorable interest rate environment, better-than-expected credit quality, and GMV growth.
- Bank of America (BAC-US), Goldman Sachs (GS-US), Citigroup (C-US), Charles Schwab (SCHW-US): Earnings reports due tomorrow.
Information Technology
- Upstart Holdings (UPST-US) +15.0%: Upgraded to neutral from underperform at Wedbush, citing improvements in credit quality and better Upstart Macro Index, which could drive increased originations.
- Adobe (ADBE-US) +2.9%: Announced expanded partnerships with Google, Meta, Microsoft Advertising, Snap, and TikTok.
- SentinelOne (S-US) +2.7%: Upgraded to overweight from neutral at Piper Sandler, citing expected share gains against CrowdStrike and potential upside from AI and automation technologies.
Communication Services
- Sirius XM Holdings (SIRI-US) +7.9%: Boosted by news that Berkshire Hathaway purchased an additional 3.6M shares, bringing its total to ~108.7M shares.
- Flutter Entertainment (FLUT-US) +4.8%: Upgraded to overweight from equal weight at Wells Fargo, citing an already priced-in worst-case scenario for UK gambling tax hikes.
Consumer Discretionary
- Hims & Hers Health (HIMS-US) +9.7%: Reuters reported that the FDA may reconsider preventing compounders from selling copies of Eli Lilly drugs.
- Canada Goose (GOOS-US) -5.2%: Downgraded to underweight from equal weight at Wells Fargo, citing a decline in global brand sentiment and headwinds from China.
- VF Corp (VFC-US) -4.8%: Downgraded to underweight from equal weight at Wells Fargo, which flagged excessive optimism around the company’s turnaround potential.
Industrials
- Caterpillar (CAT-US) -2.0%: Downgraded to underweight from equal weight at Morgan Stanley, citing concerns about potential destocking in its Construction Industries segment and bloated channel inventories.
- Triumph Group (TGI-US) -1.3%: Downgraded to underweight from neutral at JPMorgan due to high Boeing exposure and skepticism around a potential buyout.
- Boeing (BA-US) -1.3%: Post-close Friday, Boeing announced that its preliminary Q3 revenue would miss estimates, along with the delayed launch of the 777X and plans for a 10% workforce reduction (~17,000 jobs).
Utilities
- Vistra (VST-US) +5.6%: Initiated at outperform by BNP Paribas, citing tightening supply-demand dynamics in power markets and long-term power price forecasts
Asian markets are set for a positive start to Tuesday trading, with futures indicating gains in Japan and Hong Kong, while Australia also opened higher. S&P 500 futures were flat after Monday’s session. Crude oil prices are sharply lower amid easing tensions in the Middle East, while gold and copper remained steady. Bitcoin is nearing its highest level since late September.
Chinese stocks listed in the US pulled back, with the Nasdaq Golden Dragon Index down 2%, following Monday’s rally in mainland China markets after a well-received Ministry of Finance press conference. While no stimulus details were provided, strategists expect more information at the upcoming NPC Standing Committee meeting. Recent weak credit data from China showed a record low in loan growth, combined with deflation pressures and slowing exports, but the data is seen as backward-looking after recent policy support announcements. Goldman Sachs upgraded its China GDP forecast this week, while other economists remain cautious.
Oil prices are under pressure after reports that Israeli Prime Minister Netanyahu told President Biden that Israel’s response to Iran’s missile barrage would avoid oil and nuclear facilities, easing fears of supply disruption in the Middle East
Eco Data Releases | Tuesday October 15th, 2024
S&P 500 Constituent Earnings Announcements | Tuesday October 15th, 2024
Data sourced from FactSet Research Systems Inc.
