The futures market is pointing to a mixed open to today’s trading. Prior to the bell, investors received fresh data on the U.S. housing market for the month of September. This data, impacted by hurricanes, was rather soft. Housing starts totaled 1.35 million, essentially matching economists’ outlook and below the month-earlier tally of 1.36 million. Building permits came in at 1.43 million, short of the consensus estimate of 1.45 million and the 1.48 million reported for August. Importantly, despite the Federal Reserve’s recent move to cut short-term interest rates by one-half point, to 4.75%-5.0%, the cost of holding a mortgage remains elevated. Builders are working with prospective home buyers to make financing less of a burden. Still, borrowing rates will need to fall more for the housing market to discernibly strengthen. At this time, share prices are reacting more to the corporate earnings season now in progress.
Through the first four days of the current week, the major market indexes have displayed a good measure of volatility. As of Thursday’s close, the blue-chip Dow Jones Industrial Average was up 0.87%, while the broader Standard & Poor’s 500 had advanced 0.46% and the technology-heavy NASDAQ had eked out a mere 0.17% gain. Early this week, the indexes got support from the large domestic financial institutions Bank of America (BAC) and Goldman Sachs (GS), which followed Friday reports from JPMorgan Chase (JPM) and Wells Fargo (WFC), releasing solid September-quarter operating results. Eroding some of that support was an unfavorable demand outlook given by Dutch chip-equipment manufacturer ASML Holding (ASML). That outlook weighed on the valuations of NVIDIA (NVDA), Intel (INTC), Advanced Micro Devices (AMD), and Broadcom (AVGO).
At midweek, the stock indexes got a shot in the arm when investment bank Morgan Stanley (MS) announced a very strong quarterly revenue performance. Also, helping transportation equities to advance was a better-than-expected net-profit showing from United Airlines (UAL). Too, NVIDIA was able to recoup some share-price losses. The good news was partially offset by weakness in the stocks of Meta Platforms (META), Apple (AAPL), and Microsoft (MSFT), given lingering demand concerns and questions about their long-term operating strategies. We note that the indexes received additional support on Thursday after The Travelers Cos. (TRV) made a good third-quarter showing. As well, Taiwan Semiconductor Manufacturing Co. (TSM) provided a favorable view on artificial intelligence chip demand. In afterhours trading yesterday, shares of entertainment services company Netflix (NFLX) improved in price, on the news of healthy revenues and income.
It looks as if the indexes can hold on to at least modest gains for all of this week. Aside from the positive earnings reports, share-price support came from a solid September domestic retail sales report and fewer-than-expected jobless claims for the week ended October 12th. The Federal Reserve, scheduled to meet on November 6th and 7th, is monitoring incoming corporate earnings, inflation data, and jobs reports for setting its interest-rate policy. Next week, numbers will roll in on existing and new home sales, jobless claims, and durable goods orders. Furthermore, the Fed (and investors) will get updated readings on consumer sentiment and the health of the manufacturing and services sectors, the latter by way of Standard & Poor’s “flash” purchasing managers index.
We would not be surprised to see the stock indexes sustain positive momentum to yearend. That’s even with the uncertainty stemming from inflation, the U.S. Presidential election, and geopolitical hotspots. Portfolios weighted toward stable, large-cap equities, however, would be better able to withstand any “black swan” events that are not anticipated by us or Wall Street. – David M. Reimer
At the time of this article’s writing, the author held positions in none of the companies mentioned.
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