The futures market fell early this morning as a bevy of earnings news was released. Notably, Dow-30 components Proctor & Gamble (PG) and Travelers (TRV) posted stronger-than-expected earnings results. Still, negative earnings reports and downbeat outlooks were enough to lower the broader futures market. A report showed annualized U.S. housing starts of 1,439,000 retreated 8.1% in September, though building permits of 1,564,000 were better than expected. These figures were both impacted by higher mortgage rates, which have recently reached 6.94%. The futures market moved lower on this report, further suggesting a weak start to the trading day.
The stock market started strongly yesterday as companies issued reassuring earnings reports. These included Goldman Sachs (GS), which moved higher after announcing better-than-expected profits. Additionally, the U.S. dollar pulled back from recent highs compared to several other currencies, suggesting better translation rates for companies with international operations. U.S. industrial production was up 0.38% in September, beating expectations of 0.1%. Still, sentiment reached its apex early in the trading session, and stocks largely traded down throughout the day, giving up a chunk of their gains. The S&P 500 finished up 42 points, the NASDAQ increased 97 points, and the Dow Jones Industrial Average rose 338 points.
Market breadth finished positively, as advancers outpaced decliners by a 2.5-to-1.0 ratio yesterday. All eleven sectors of the economy were up on the day, and industrial stocks were among the best performers. On the other hand, healthcare issues were among the weakest, though only relatively. Shares of Dow-component Salesforce (CRM) were notably higher yesterday, having garnered interest from an activist investor.
In commodity news, oil prices were higher yesterday, breaking a recent trend of downward price movements. Elsewhere U.S. Treasury bond yields were largely higher across the board. Interest rates remain inverted, with short-term rates trading higher than long-term ones, which often portends a recession. The Chicago Board Options Exchange Volatility Index, or VIX, declined as demand for options protection decreased.
Several economic reports will be released in the days ahead. These include initial jobless claims, the Philadelphia Federal Reserve Bank’s Manufacturing Business Outlook Survey, existing home sales, and the leading economic indicators on Thursday. On Friday, the Federal Reserve will release its Index of Common Inflation Expectations, which is often a key input into its decision-making process. Meantime, several hundred companies will release earnings reports in the days ahead. These include several regional banks and a few Dow components, such as Dow, Inc. (DOW), American Express (AXP), and Verizon (VZ). - John E. Seibert III
At the time of this article’s writing, the author held one or more positions in the companies mentioned.
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