ETFsector.com Daily Trading Outlook, October 18th, 2024
S&P futures are up 0.2% in Friday morning trading. Friday’s focus is on positive results from Netflix (NFLX), strong Apple (AAPL) iPhone sales in China, and better-than-expected Q3 GDP and activity data from China, alongside the implementation of stimulus measures. Markets remain quiet ahead of two peak weeks of Q3 earnings and the US election, with expectations of a Trump/GOP traction providing a potential tailwind. The soft-/no-landing narrative remains a key bullish driver.
Today’s economic calendar includes housing starts and building permits, with Fedspeak from Kashkari at 10:00 AM and Waller at 12:10 PM.
Earnings Highlights
- Netflix (NFLX): Strong Q3 results and positive 2025 outlook.
- Intuitive Surgical (ISRG): Positive takeaways with revenue, placements, and EPS all ahead.
- CVS Health (CVS): Q3 guidance below expectations and announced a management change.
- Crown Holdings (CCK): Beat expectations, raising FY EPS guidance.
- Western Alliance (WAL): Weaker on EPS miss and light guidance.
- WD-40 (WDFC): Missed on fiscal Q4 EPS and guided FY25 below consensus.
- MGPI: Under pressure following a negative preannouncement on soft alcohol spirits trends and elevated whiskey inventories.
- Outside earnings, Apple (AAPL) saw China iPhone sales up 20% year-over-year in the first three weeks since the iPhone 16 debut
US equities closed mixed on Thursday, with the Dow up 0.37%, S&P 500 down 0.02%, Nasdaq up 0.04%, and the Russell 2000 down 0.25%. Major indices remain on track for weekly gains.
The market was influenced by growth and momentum trades, with the AI growth theme gaining attention after TSMC’s earnings and guidance. While the cyclical rotation narrative that drove recent gains was mixed, solid earnings and economic data helped support the soft-/no-landing economic outlook. Meanwhile, China stimulus skepticism remained a concern as recent measures to support the property sector were seen as insufficient. The market also focused on political developments surrounding a potential Trump/GOP sweep, which raised optimism around tax cuts despite tariff concerns.
On the economic front, September retail sales were stronger than expected, rising 0.4% compared to the forecast of 0.3%. Initial claims came in below expectations, though some distortions were anticipated due to hurricane impacts. The Philadelphia Fed Index rose to its highest level since July, while industrial production fell more than expected. Outside the US, the ECB cut rates by 25 basis points as expected, and China’s Q3 GDP and September activity data are due out tonight.
Notable Stock Movements
Information Technology
- Taiwan Semiconductor (TSM-US) +9.8%: Outperformed after beating expectations on margin performance, driven by higher utilization and cost controls. AI demand was highlighted, and the Q4 sales and gross margin (GM) guidance was well above consensus.
- Fortinet (FTNT-US) -1.5%: Downgraded to underperform by Mizuho Securities due to concerns over near-term growth rates following recent checks.
Financials
- Webster Financial (WBS-US) +11.6%: Q3 EPS in line, though revenue missed. NII and NIM beat, with deposit and loan growth as bright spots. The bank provided Q4 NII guidance between $590-600M and noted better-than-feared non-performing loans (NPLs).
- Synovus Financial (SNV-US) +5.1%: Beat on adjusted EPS, with NII, NIM, and fee income ahead of consensus. Despite trimming Q4 loan growth guidance, analysts viewed the report as solid.
- Blackstone (BX-US) +6.3%: Q3 earnings and revenue beat expectations, with the firm reporting $41B of inflows and deploying $54B of capital, the highest in over two years. FT reported that Blackstone is preparing to take some investments public.
- Huntington Bancshares (HBAN-US) -2.6%: Q3 earnings beat expectations, with NII and NIM in line. Analysts raised concerns over Q4 PPNR guidance, citing softer NII and higher expenses.
- KeyCorp (KEY-US) -2.5%: Q3 earnings were better than expected, helped by lower provisions and expenses. However, analysts had mixed reactions due to soft NIM and loan growth, as well as higher net charge-offs (NCOs).
Industrials
- CSX Corp (CSX-US) -6.7%: Missed on Q3 EPS, revenue, and operating income, with total volume up 3% year over year. Revenue is expected to decline moderately in Q4, driven by lower fuel prices and softer coal markets. The company disclosed a subpoena from the SEC related to accounting restatements.
Health Care
- Elevance Health (ELV-US) -10.6%: Reported a Q3 EPS miss of around 13%, with a higher medical loss ratio (MLR) at 89.5%, roughly 200 basis points worse than expected. The company lowered its FY24 EPS guidance and highlighted unprecedented challenges in its Medicaid business.
Consumer Discretionary
- Expedia Group (EXPE-US) +4.8%: Shares rose after the Financial Times reported that Uber (UBER-US) has considered acquiring the company, though no formal approach has been made, and discussions are not currently active.
- Zuora, Inc. (ZUO-US) +5.7%: Announced it will be acquired by Silver Lake and GIC for $10 per share in cash, representing a 6.2% premium to the previous close. The deal is expected to close in Q1 2025.
- Snap-On (SNA-US) +10.0%: Q3 earnings beat expectations, though revenue was in line. The company guided FY24 capital expenditures to the low end of its previous range, with international sales in its Tools segment performing well.
Energy
- Liberty Energy (LBRT-US) -8.9%: Missed Q3 EBITDA estimates and noted that it expects a greater-than-seasonal reduction in Q4 frac activity. The company also plans to temporarily idle some frac fields but expects healthy free cash flow in 2025.
Materials
- PPG Industries (PPG-US): Highlighted a large Industrial segment margin miss, though its Performance segment remained strong. The company announced the sale of its NA Arch business and new cost-reduction plans.
- Alcoa (AA-US): Reported stronger-than-expected EBITDA, driven by robust alumina prices.
- Steel Dynamics (STLD-US) +4.0%: Q2 EPS exceeded the September 16 guidance range, and revenue beat expectations. The company noted pricing stabilization later in the quarter and expects pricing to recover in 2025 amid continued manufacturing onshoring
Financials
- Discover Financial (DFS-US) +2.0%: Q3 earnings and revenue beat, though guidance for loan growth was revised lower for 2024. The company raised the low end of its NIM range.
Eco Data Releases | Friday October 18th, 2024
S&P 500 Constituent Earnings Announcements | Friday October 18th, 2024
Data sourced from FactSet Research Systems Inc.
