Stocks Edge Higher Despite Mixed Earnings
- NASDAQ Composite +0.20% Dow +0.28% S&P 500 +0.21% Russell 2000 +0.13%
- NASDAQ Advancers: 1133 Decliners: 1098
- Today’s Volume (vs. Tuesday) -1.69%
- Crude +1.01%, Gold +0.32%
Market Movers
- MBA Mortgage applications index fell -11.9% in the week ending October 18th after rising +0.5% the week before
- August US FHFA House Price Index +0.2% vs. consensus +0.4%
- DOE reports crude oil inventories (1.7M) barrels vs consensus +2.4M barrels
Charlie’s Commentary
Things were going so well yesterday, that is until The House of Commons voted against UK Prime Minister Boris Johnson’s attempt to fast track Brexit after voting in favor of the deal. That was enough to dry up bids and create a risk off atmosphere. The major indexes switched from green to red finishing at session lows . The Dow fell -0.15% while the S&P 500 dropped -0.36% and Nasdaq slipped by -0.72%. Technology, Communication Services, Consumer Discretionary were the biggest laggards. Energy (WTI strength), Industrials (machinery), Healthcare (Alzheimer's treatment news) were among the outperformers.
This morning investors are focused squarely on earnings which generally have been a pleasant surprise. According to Factset, of the 118 S&P 500 companies that have reported so far, 81% have posted better than expected results. Late yesterday and today investors received reports from some key sector leaders that were less than stellar. Despite this however, investors are taking a measured approach to the big picture in earnings and have not panicked.
Yesterday after the close, Texas Instruments announced earnings that produced a fourth-quarter revenue forecast that trailed analyst estimates. As TXN was the first company in the semiconductor space to release earnings at a time when chip stocks have surged on optimism that the trade war will reach a settlement, this was not an auspicious start for semi earnings to come. This morning, economic bellwether Caterpillar cut its full year 2019 earnings outlook after reporting third quarter results that fell short of analysts’ estimates. The company blamed the dismal results on a reduction in inventories from dealers who were proactively managing their businesses as ongoing trade uncertainty remains. Executives said in a press release this weakness could persist due to “global economic uncertainty.” Despite this report, shares of CAT are up reflecting investor confidence that management has a handle on the business. It also didn't hurt that they announced a $1 billion buyback program. Finally, Boeing also missed estimates to no one’s surprise, but shares were getting a boost after stating they expect the 737 Max to fly this year and forecasting an output increase of 36% for the jet next year. It should be noted that with these demand warnings from such major players in the marketplace and with an FOMC meeting taking place next week, this probably solidifies a rate cut by the Committee continuing to keep monetary policy accommodative.
Looking at the economic reports today, mortgage applications fell by 11.9% for the week ending October 18th according to the Mortgage Bankers Association. While this is a significant drop, it is still 54% higher overall than a year ago when interest rates were higher. The average contract interest rate for 30-year fixed-rate mortgages increased to 4.02 percent from 3.92 percent, with points increasing to 0.38 from 0.35 for loans with a 20% down payment. That rate was 109 basis points higher the same week last year. Mortgage applications to purchase a home, which are less sensitive to weekly rate moves, fell 4% for the week but were 6% higher compared with the same week one year ago. According to the Federal Housing Finance Agency, the home price Index rose by 0.2% during August, slightly lower than the 0.3% estimate. Year over year home prices rose 4.6%
In the commodity space, oil is trading higher as a report released by the US Energy Information Administration showed that crude inventories decreased by 1.7 million barrels in the week ending October 18th. Analysts had been expecting a build of 2.2 billion barrels. Gold is trading up today as uncertainty over Britain’s upcoming exit from the European Union and concerns over a slowdown in the global technology sector weighed on equities, prompting investors to seek refuge in the shiny metal
Sector strength today is being led by Communications (+0.62), Basic Materials (+0.55%) and Healthcare (+0.54%). Sector weakness is evident in Consumer Discretionary (-0.62%), Industrials (-0.38%) and Technology (-0.17%).
Sector Recap
Brian’s Technical Take
Today we look at the Dow Jones Transportation Index, the oldest tracked index in existence and an leading indicator of economic growth. While trading down today, primarily due to Norfolk Southern’ s earnings miss, it has been on a steady road to recovery reflective of a solid domestic economy. Transportation as a category has shown solid upside the last two weeks filling the gap with a steady rise back towards September resistance, This move confirms a bullish tone with resistance at the 10,820 level.
Nasdaq's Market Intelligence Desk (MID) Team includes:
Charles Brown is Associate Vice President on The Market Intelligence Desk with over 20 years of equity capital markets experience. Charlie has extensive knowledge of equity trading on both floor and screen-based marketplaces. Charlie assists with the management of The Market Intelligence Desk and works with Nasdaq listed companies providing them with insightful objective trading analysis.
Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.
Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen-based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.
Brian Joyce, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Before joining Nasdaq, Brian spent 16 years as an institutional trader executing equity and options orders for both the buy side and sell side. He also provided trading ideas and wrote technical analysis commentary for an institutional research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Transportation companies, among others, understand the trading in their stock. Brian is a Chartered Market Technician (CMT).
Michael Sokoll, CFA is Associate Vice President on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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