Stocks Mixed on Heaviest Day of Earnings; 3M Weighs on Dow
- NASDAQ Composite +0.70% Dow -0.11% S&P 500 +0.16% Russell 2000 -0.10%
- NASDAQ Advancers: 896 Decliners: 1322
- Today’s Volume (vs. Wednesday) +28.47%
- Crude +0.41% Gold +0.43%
Market Movers
- September Durable Orders M/M -1.1% vs -1.0% consensus; Prior revised to +0.3% from +0.2%. September Durable Goods ex-trans M/M -0.3% vs -0.3% consensus; Prior revised to +0.3% from +0.5%
- Initial Claims 212K vs 217K consensus; Prior revised to 218K from 214K
- October US Markit PMI - Services - Flash 51.0 vs. consensus 51.0. Oct US Markit PMI - Manufacturing - Flash 51.5 vs. consensus 50.5
- Bloomberg Consumer Comfort for period ending October 20th 63.4. Prior period 63.5
- September US New Home Sales 701K vs. consensus 700K. August revised to 706K from 713K
Charlie’s Commentary
Equities finished higher in yesterday’s trading, ending near their best levels of the day. The Dow finished +0.17 while the S&P 500 rose +0.28% and Nasdaq climbed +0.19%. Energy, materials and communications services were best performers. Consumer discretionary and industrials were only sectors lower. Earnings was the main investor focus, with 25% of the S&P 500 now having reported Q3 results largely continuing to beat lowered estimates. There has been more of a cautious tone to recent earnings results, but the market continues to find support from the de-escalation of US-China trade tensions and an accommodative Fed.
Early market sentiment was leading heavily to the favorable side as a rash of upbeat earnings from the likes of Tesla, Microsoft, Lam Research, Comcast, Dow Inc., Paypal and O’Reilly Automotive have kept the third quarter earnings drum beating with enthusiasm. That initial enthusiasm, however, was tempered when industrial bellwether 3M released earnings missing on revenue and taking a chunk of points out of the Dow, creating a mixed market. Today is the heaviest day of earnings so far with 45 members of the S&P 500 releasing results. According to Factset, more than 31% of S&P 500 companies have reported quarterly earnings thus far, with nearly 80% of them posting results that beat analyst estimates.
But earnings alone is not the sole influence on today’s market as we have some sound bites from the ongoing U.S.-China trade negotiations. According to unnamed sources who are privy to the talks, China aims to buy at least $20 billion of agricultural products in a year if it signs a partial deal with the US and would consider buying more if future rounds go well. That would bring the import of US farm goods back to the levels that existed before the US imposed tariffs. In an act of good faith China has already paved the way for signing the first phase of the deal issuing waivers for purchasing 10 million tons of soybeans while considering approving an additional 4-5 million tons of various grains. Across the pond during Mario Draghi’s last meeting as head of the European Central Bank, he announced that the ECB will keep monetary stimulus unchanged. Forever known as promising to do “whatever it takes” to keep the euro zone intact, he will be succeeded by Christine Lagarde, the former Chairman of the International Monetary Fund.
Turning to the economic calendar, there are continued signs of economic slowdown. According to the Commerce Department, bookings for all durable goods (items meant to last 3 years), declined by -1.1%, the most since May. Bookings for non-military capital goods ex aircraft, often seen as a proxy for business investment, fell -0.5% vs the consensus -0.1%. The labor force, however, remains strong as initial employment claims for the week ending October 19th fell to 212,000. Overall claims remain at a half century low as fewer people seek unemployment benefits. October US Manufacturing PMI came in at 51.5 vs. 51.0 the previous period. Services PMI rose to 51.0 up from the prior periods reading of 50.9. A reading of above 50 signals expansion while a reading below 50 represents contraction. September single family homes fell -0.7% to a 701,000 annualized pace suggesting the momentum in the sector may be slowing despite wage gains and lower mortgage rates. The median sales price decreased by -8.8% from a year earlier to 299,400. That was the lowest level since February of 2017.
Oil is trading in cautious territory today as additional signs of global weakness put into question the black gold’s demand. Employment in Germany’s private sector fell for the first time in six years during October signaling economic weakness in the third largest economy of the world. Gold is rebounding off of earlier lows on weaker than expected Durable Goods orders and ECB President Mario Draghi saying the downside economic risks in the Eurozone are prominent.
Technology leads all sector performance today (+0.91%), followed by Utilities (+0.38%) and Basic Materials (+0.32%). Lagging the market are Communications (-0.84%), Healthcare (-0.38%) and Energy (-0.35%).
Sector Recap
Brian’s Technical Take
The Markit US Manufacturing PMI figure for the month of October was both higher and above expectations for the second consecutive month. The improving data is noteworthy as a number of sectors have been in a holding pattern of sorts for quite some time.
The industrials sector is one group that made its all-time highs nearly two years ago in January of 2018. Over the ensuing 21 months, the S&P 500 industrials index has been consolidating into what has evolved into a large continuation pattern (inverse head & shoulders). More recently since April a clearly defined resistance line has been established at the 665 level. A breakout above this line could signal a transition is underway from consolidation to trend.
Breakouts from large bases such as this can often be accompanied by strong upside momentum. The size of the 21-month range projects a measured move to the 840 level, +27% from last sale, if and when a breakout is triggered. With the BKX currently breaking out from its own large base which we highlighted last week, I suspect the industrials could soon follow suit.
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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