Market Overview
The S&P 500 decreased slightly by 0.02%, while the Nasdaq Composite edged up by 0.04%. The Dow Jones Industrial Average saw a 0.4% increase, but the Russell 2000 fell by 0.3% after leading index gains earlier this week. The market exhibited a negative bias due to rising rates and the belief that the Federal Reserve may not be as aggressive as previously anticipated, following solid economic data.
Market Breadth
At the NYSE, decliners led advancers by an 11-to-10 margin, and at the Nasdaq, the margin was 3-to-2. Stronger-than-expected September retail sales and less alarming initial jobless claims were key data points this morning. The 10-year Treasury yield increased from 4.03% to 4.08%, while the 2-year yield rose from 3.95% to 3.98%, having reached 4.00% earlier.
Sector Performance
Five S&P 500 sectors ended the day higher, led by energy and information technology, both up 0.4%, and financials, which rose 0.3%. Rate-sensitive sectors such as utilities and real estate closed lower, down 0.9% and 0.7% respectively.
Key Stock Movements
- The PHLX Semiconductor Index (SOX) increased by 1.0%, bolstered by Taiwan Semiconductor Manufacturing Company (TSM, Financial) which surged 9.8% following impressive Q3 results and optimistic Q4 guidance.
- Blackstone (BX) climbed 6.3% and Travelers (TRV) rose 9.0%, both buoyed by positive earnings reports.
Year-to-Date Performance
- S&P 500: +22.5%
- Nasdaq Composite: +22.4%
- S&P Midcap 400: +15.0%
- Dow Jones Industrial Average: +14.7%
- Russell 2000: +12.5%
Economic Data Review
- Weekly Initial Claims: 241K (consensus 270K); prior revised to 260K from 258K. The report was affected by hurricanes but showed better-than-expected initial claims.
- September Retail Sales: +0.4% (consensus 0.2%); prior 0.1%. Ex-auto sales rose 0.5% (consensus 0.1%). Consumer spending increased in discretionary categories.
- October Philadelphia Fed Index: 10.3 (consensus 4.0); prior 1.7.
- September Industrial Production: -0.3% (consensus -0.1%); prior revised to 0.3% from 0.8%. Capacity Utilization was 77.5% (consensus 77.9%). The Boeing strike and hurricanes impacted growth.
- August Business Inventories: +0.3% (consensus 0.3%); prior revised to 0.3% from 0.4%.
- October NAHB Natural Gas Inventories: 43 (consensus 43); prior 41.
Upcoming Economic Events
Friday's economic calendar includes the September Housing Starts and Building Permits report, scheduled for release at 8:30 ET.
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Today's News
Netflix (NFLX, Financial) reported impressive Q3 results with GAAP EPS of $5.40, surpassing expectations by $0.28. The company also saw revenue rise to $9.82 billion, marking a 15% year-over-year increase, and a gain of 5.07 million global streaming paid memberships. Netflix anticipates continued growth in its advertising business, with ads membership up 35% quarter-on-quarter. The company projects a 15% revenue growth for Q4 2024, with an even higher growth rate on a foreign exchange-neutral basis.
Taiwan Semiconductor (TSM, Financial) experienced a significant surge in stock price, jumping 13% following its third-quarter results and guidance that exceeded estimates. The company's net revenue grew 36% year-over-year, driven by strong demand for AI chips. Despite initial market concerns after ASML's financial update, TSM's performance lifted sentiments in the semiconductor sector, with other chipmakers like Nvidia (NVDA, Financial) and AMD (AMD, Financial) also seeing gains.
Intuitive Surgical (ISRG, Financial) posted strong Q3 earnings, with Non-GAAP EPS of $1.84, beating estimates by $0.20, and revenue growing by 17.2% year-over-year. The company expanded its da Vinci surgical system installations to 9,539, reflecting a 15% increase from the previous year. Intuitive Surgical's growth continues to attract investor attention, despite some valuation concerns.
Molina Healthcare (MOH, Financial) and Centene (CNC, Financial) faced declines in trading after Elevance Health lowered its full-year earnings forecast. Molina dropped approximately 13%, while Centene fell by 10%. The market reacted to concerns over costs in the insurance sector, particularly related to Medicaid and Medicare services.
Kinder Morgan (KMI, Financial) saw a slight decrease in trading after missing Q3 earnings estimates and issuing a lower guidance for full-year earnings. The company cited weaker commodity prices and delays in renewable natural gas facilities as reasons for the shortfall. Despite this, Kinder Morgan anticipates a 5% increase in adjusted EBITDA and a 9% rise in adjusted EPS for the full year compared to 2023.
CSX Corporation (CSX, Financial) disclosed receiving a subpoena from the SEC regarding previously reported accounting errors. The company is cooperating with the investigation, which relates to misstatements in financial performance metrics and engineering costs. CSX had already revised its financial statements to correct these errors.
In the restaurant sector, Shake Shack (SHAK, Financial) is expected to outperform according to Raymond James, which highlighted the chain's strong marketing initiatives and product offerings. Analysts remain optimistic about Shake Shack's Q4 comparable sales outlook, driven by successful digital promotions and menu items.
Chip stocks, including ASML (ASML, Financial), saw recovery after a recent sell-off, with the iShares Semiconductor ETF (SOXX) climbing 2% and Taiwan Semiconductor (TSM, Financial) leading gains. The tech sector's volatility in October was noted by UBS, but the positive earnings reports helped bolster confidence in the market.
Bank OZK (OZK) reported Q3 GAAP EPS of $1.55, slightly beating expectations. The bank saw a significant increase in loans and deposits year-over-year, reflecting strong financial health and growth potential.
GuruFocus Stock Analysis
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