The middle trading day of the last week of October, a historically volatile month for equities, begins with Wall Street scrutinizing a heavy slate of economic and earnings news. On the economic front, the main report was the first reading on the third-quarter gross domestic product (GDP). At 8:30 A.M. (EDT), the Commerce Department reported that GDP expanded by an estimated annualized rate of 2.8% during the three-month quarter, driven by a boost in consumption. The GDP figure exceeded the expectation coming into 2024, but came in a bit below the most recent forecasts, which still suggests that a soft landing for the U.S. economy is plausible. The report also showed that the pace of price growth eased further during the summer and early fall, with the Personal Consumption Expenditures (PCE) Price Index coming in at 1.5%, below the Fed’s target rate of 2.0%. On Friday, we will learn more about the job market, with the release of October employment and unemployment figures.
At 8:15 A.M. (EDT), payroll processing giant Automatic Data Processing (ADP) reported that private-sector payrolls climbed by an estimated 233,000 positions in October, well above the consensus estimate calling for a gain of 113,000. It also showed a moderation in inflation in the private-labor market. The ADP report followed the release of the Job Openings and Labor Turnover Survey (JOLTS) report, which showed a notable decline in the number of available positions last month. The JOLTS report was a good sign for inflation in the labor market, as fewer openings means that job seekers have less bargaining power on the salary front. The equity futures, which were mixed heading into the economic news, are still indicating a bifurcated showing for stocks when trading kicks off stateside, with quarterly results driving market sentiment. In general, trading has been mixed over the last several days, with the Dow Jones Industrial Average finishing lower in six of the last seven sessions, while the technology-heavy NASDAQ Composite ended yesterday at a record high.
As noted, we did get a slew of quarterly results from Corporate America since the close of trading yesterday afternoon. The headline report came from technology behemoth Alphabet (GOOG), the parent company of Google, which kicks off earnings results from a number of mega-cap technologies companies this week. After the close of trading today, we will receive the latest quarterly results from Microsoft (MSFT) and Meta Platforms (META). Overall, technology stocks, though inching higher the last few sessions, did not move very much, with Treasury market yields rising and investors likely unwilling to make a move in the sector ahead of the major earnings releases.
Alphabet reported strong results, earning $2.12 a share, on a revenue advance to $88.27 billion. By comparison, Wall Street was looking for earnings per share of $1.85, on revenues of $86.3 billion. Investors were happy to see in-line ad revenues, which assuaged some concerns about the metric coming into the release, and the surge in cloud revenues. The latter area includes the company’s artificial intelligence (AI) platforms. Shares of Alphabet are looking at a higher start today, and that should help the technology-heavy NASDAQ Composite take another step up, at least at the start of trading stateside.
Overall, the quarterly results were mixed. Dow-30 component Visa (V) beat estimates on both the top and bottom lines, fueled by an 8% increase in payments volume. Visa stock also is trading higher in pre-market action. Conversely, the stocks of Advanced Micro Devices (AMD) and Chipotle Mexican Grill (CMG) are trading lower in extended market hours after reporting mixed results. AMD reported in-line earnings, on an 18% revenue advance. However, AI chip growth failed to excite Wall Street and that is responsible for the weighing on the stock this morning. Chipotle beat earnings-per-share forecasts of $0.27 by a few pennies, but revenues missed estimates, with comparable-store sales coming in a bit lighter than expected.
This morning, Dow-30 component Caterpillar (CAT) posted disappointing quarterly results (revenue beat forecasts, but profits fell short of estimates), and shares of the heavy equipment maker are trading lower in pre-market action. This may add to the Dow 30’s recent struggles. Likewise, shares of Eli Lilly (LLY) are under notable selling pressure after the pharmaceuticals giant fell short of expectations on both the revenue and earnings-per-share fronts, as diabetes and weight-loss drug sales fell short of expectations. The company also lowered its full-year prognostications. – William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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