S&P futures are little changed in Wednesday morning trading, following a mostly lower session for US equities on Tuesday. Semiconductors, energy, managed care, and China-exposed stocks were notable laggards, while banks, REITs, utilities, and staples performed better. Treasuries strengthened as global bond yields dipped, partly due to cooler UK inflation data.
No significant directional drivers are currently in play, with the focus shifting to earnings activity and Thursday’s key macro data, including September retail sales and an anticipated 25 bp rate cut from the ECB. The market’s path remains optimistic on the back of the soft-/no-landing narrative, expected unwinding of downside hedges, reopening of corporate buybacks, and favorable late-year seasonality.
Wednesday is a quiet day for macro data, with only September import and export prices on the calendar. Attention will turn to Thursday’s reports on initial claims, industrial production, homebuilder sentiment, and the Philly Fed manufacturing index.
In earnings, JBHT stood out with strong intermodal volumes, while UAL announced a $1.5B buyback following its Q3 beat. OMC lagged despite a Q3 beat. INTC faced pressure from reports of a security review in China, and QCOM is reportedly delaying a decision on an INTC deal until after the US presidential election. NVCR surged on FDA approval of Optune Lua.
US equities closed mostly lower on Tuesday, with the Dow down 0.75%, the S&P 500 off 0.76%, and the Nasdaq declining 1.01%, while the Russell 2000 edged up 0.05%. The decline followed Monday’s record high for the S&P 500, with semiconductors under significant pressure due to weak guidance from ASML. Energy stocks were also weaker amid a sharp pullback in crude oil prices. On the other hand, banks saw gains on well-received earnings reports, and defensive sectors like utilities, REITs, and drug stores also outperformed.
In macroeconomic news, the NY Fed Empire Manufacturing index for October came in at -11.9, missing expectations of +3.0 and falling from September’s +11.5. The report cited drops in new orders and shipments, although labor-market conditions showed improvement. The NY Fed Survey of Consumer Expectations indicated a slight rise in medium- and long-term inflation expectations. Fed commentary included Fed’s Daly noting that rates are still contributing to inflation control but stressing the importance of staying vigilant.
Treasury yields were mostly lower, leading to a flattening yield curve, while the Dollar Index was stable. Gold rose 0.5%, Bitcoin futures were up 1.6%, and WTI crude fell 4.4%, reflecting reduced geopolitical concerns after reports that Israel would not target Iranian oil facilities.
Earnings Highlights
- Bank of America (BAC): Shares rose after strong performance in net interest income (NII) and investment banking (IB).
- Goldman Sachs (GS): Beat estimates across all segments, but the stock traded lower, possibly due to higher expectations.
- Johnson & Johnson (JNJ): Reported strength in its Innovative Medicine segment, but MedTech results were weaker.
- PNC Financial (PNC): Earnings beat expectations, driven by strong loan and deposit growth.
Broader Themes Impacting Markets
Several broad factors influenced Tuesday’s trading. Semiconductor stocks declined following disappointing bookings and guidance from ASML, with additional pressure from reports that the US might limit AI chip exports. The energy sector also underperformed as crude oil prices tumbled on news that Israel would not target Iranian oil infrastructure, alleviating some geopolitical concerns. On the other hand, banks saw gains on strong earnings, and defensive sectors provided a cushion against broader market losses
Notable Stock Movements by GICS Sector
Information Technology
- Advanced Micro Devices (AMD) -5.2%: Declined after reports that the US may cap exports of AI chips to certain countries, impacting the sector.
- ASML Holding (ASML) -16.3%: Dropped sharply following a Q3 bookings miss and disappointing 2025 sales guidance, citing a slow recovery outside of AI.
- AppFolio (APPF) -10.8%: Downgraded to underperform by Keefe, Bruyette & Woods, with concerns over future revenue growth.
- CommVault Systems (CVLT) -9.8%: Downgraded to neutral by Guggenheim, reflecting concerns over growth and recent reseller performance.
Financials
- Charles Schwab (SCHW) +6.1%: Rose after reporting Q3 earnings and revenue beats, highlighting client engagement and strong net flows in managed investing.
- PNC Financial Services (PNC) +2.0%: Gained after surpassing Q3 earnings expectations, with strength in net interest income and fee income.
- Citigroup (C) -5.1%: Despite a Q3 earnings beat, shares fell due to lower-than-expected net interest income (NII) and concerns over ongoing business transformation.
- Wolfspeed (WOLF) +21.3%: Surged after signing a non-binding agreement with the US Commerce Department for up to $750M in CHIPS Act funding.
- Enphase Energy (ENPH) -9.3%: Declined after a downgrade from RBC to sector perform, driven by concerns over market dynamics affecting growth rates.
Health Care
- UnitedHealth Group (UNH) -8.1%: Shares dropped despite positive Q3 earnings, as the company trimmed the high end of its FY24 EPS guidance due to concerns over medical reserve levels and CMS funding reductions.
- Walgreens Boots Alliance (WBA) +15.8%: Jumped on strong FQ4 earnings, better-than-expected FY25 revenue guidance, and a new store optimization program expected to enhance profitability.
Consumer Discretionary
- Coty (COTY) -10.8%: Fell after cutting its FQ1 revenue-growth guidance, citing slower trends in the mass beauty segment.
- Telefonaktiebolaget LM Ericsson (ERIC) +13.1%: Rose on strong Q3 results, particularly in its North American networks business, though its Q4 guidance was softer
Industrials
- Boeing (BA): Filed for a $25B mixed shelf offering, adding to recent headlines about business restructuring and workforce reductions.
Communication Services
- Doximity (DOCS) +4.5%: Upgraded to overweight by Barclays, highlighting expansion opportunities into self-service ad sales.
Materials
- LVMH (MC-FR): Reported organic growth below consensus, reflecting challenges in the global luxury market.
Eco Data Releases | Wednesday October 16th, 2024
S&P 500 Constituent Earnings Announcements | Wednesday October 16th, 2024
Data sourced from FactSet Research Systems Inc.
