Weekly Market Overview
The stock market closed out another winning week with the S&P 500 and Dow Jones Industrial Average reaching new record highs. The Russell 2000 led the index gains with a 1.9% increase, while the S&P 500 rose 0.9%, the Nasdaq Composite gained 0.8%, and the Dow Jones Industrial Average climbed 1.0%. Gains were broad-based, driven by ongoing momentum as stocks continued to hit new highs. The equal-weighted S&P 500 increased by 1.1% compared to last Friday.
Semiconductor Sector Performance
Semiconductor stocks faced challenges this week. The PHLX Semiconductor Index (SOX) fell 2.4% following a Bloomberg report that the Biden administration is considering restricting sales of advanced AI chips to certain countries, particularly in the Persian Gulf. ASML (ASML) released its Q3 results early, disappointing investors with below-consensus earnings per share (EPS), revenues, and net bookings. The company also issued weaker-than-expected FY25 revenue guidance, citing slow recovery in other market segments despite strong AI developments.
Conversely, Taiwan Semiconductor Manufacturing Company (TSM, Financial) reported strong Q3 results and better-than-expected Q4 guidance, sparking some buy-the-dip interest by the end of the week.
Earnings Impact
This week's earnings news was generally well-received, contributing to the positive market sentiment. However, UnitedHealth (UNH, Financial), a Dow component, saw a sharp decline after its Q3 earnings report showed an increase in its medical care ratio and offered cautious FY25 earnings guidance. This affected the S&P 500 health care sector's performance, making it one of the two sectors to close lower, alongside energy, which fell 2.6% due to a drop in oil prices. WTI crude oil futures closed at $68.62 per barrel.
Financial Sector Highlights
The financial sector performed well as investors processed a wave of earnings reports. Morgan Stanley (MS, Financial) and Goldman Sachs (GS, Financial) were among the standout performers. Market participants also speculated that the Federal Reserve might not be as aggressive as previously thought, following solid economic data, including stronger-than-expected September retail sales and less severe initial jobless claims.
Monday's Market Activity
Monday saw a broad rally on below-average NYSE volume. The S&P 500 (+0.8%) and Dow Jones Industrial Average (+0.5%) reached further into record territory, while the Nasdaq Composite (+0.9%) closed just below its all-time high. Mega caps and chipmakers showed initial strength, attracting buying interest in other stocks. Oil prices were pressured by demand concerns after China's Ministry of Finance provided limited details on economic stimulus. No significant U.S. economic data was released on Monday.
Tuesday's Market Movement
On Tuesday, the S&P 500 (-0.8%), Nasdaq Composite (-1.0%), and Dow Jones Industrial Average (-0.8%) posted losses, while the Russell 2000 gained 0.1%. Weakness in semiconductor stocks, driven by the Bloomberg report and ASML's disappointing Q3 results, affected index-level performance. UnitedHealth (UNH, Financial) dragged down other health care stocks, resulting in a 1.2% decline for the S&P 500 health care sector. Despite mixed earnings responses, the financial sector ended 0.3% higher.
Economic data included the October NY Fed Empire State Manufacturing Index at -11.9, below the consensus of 2.0.
Wednesday's Market Performance
The stock market posted solid gains on Wednesday. The Russell 2000 outperformed, rising 1.6% for a weekly gain of 2.5%. The S&P 500 (+0.5%), Nasdaq Composite (+0.3%), and Dow Jones Industrial Average (+0.8%) closed near their daily highs. The financial sector (+1.2%) led the market, boosted by positive earnings responses from Morgan Stanley (MS, Financial), First Horizon (FHN, Financial), and Synchrony Financial (SYF, Financial). A rebound in semiconductor stocks and buy-the-dip interest contributed to the positive trend.
Economic data included:
- Weekly MBA Mortgage Applications Index: -17.0%; Prior: -5.1%
- September Import Prices: -0.4%; Prior revised to -0.2% from 0.8%
- September Export Prices: -0.7%; Prior revised to -0.9% from -0.7%
Thursday's Market Trends
Thursday saw the S&P 500 (-0.02%) and Nasdaq Composite (+0.04%) close near their previous levels, while the Dow Jones Industrial Average rose 0.4% and the Russell 2000 fell 0.3%. Rising market rates and the perception of a less aggressive Fed influenced the market. Strong semiconductor stocks limited downside moves, with the PHLX Semiconductor Index (SOX) rising 1.0% after Taiwan Semiconductor Manufacturing Company (TSM, Financial) reported strong Q3 results.
Economic data highlights:
- Weekly Initial Claims: 241K (consensus 270K); Prior revised to 260K from 258K
- September Retail Sales: 0.4% (consensus 0.2%); Prior: 0.1%
- October Philadelphia Fed Index: 10.3 (consensus 4.0); Prior: 1.7
Friday's Market Highlights
The S&P 500 (+0.4%) and Dow Jones Industrial Average (+0.1%) reached new record highs on Friday. The Nasdaq Composite (+0.6%) gained over 100 points, while the Russell 2000 fell 0.2%. Netflix (NFLX, Financial) saw significant gains after releasing better-than-expected earnings and guidance, boosting the S&P 500 communication services sector (+0.9%). Despite strong Q3 EPS results, American Express (AXP, Financial) weighed on the financial sector, which ended flat.
Economic data included:
- September Housing Starts: 1.354 million (consensus 1.350 million); Prior revised to 1.361 million
- September Building Permits: 1.428 million (consensus 1.455 million); Prior revised to 1.470 million
Guru Stock Picks
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Today's News
Google (GOOG, GOOGL) has secured a temporary delay from a federal court, allowing it more time to open its app store to independent marketplaces. This decision comes as the Ninth Circuit Court of Appeals reviews the previous ruling, which Google lost to Epic Games. The tech giant argues that the original deadline was technically unfeasible, marking a significant moment in its ongoing legal battles with app store challengers like Epic Games and Apple (AAPL, Financial).
CVS Health (CVS, Financial) announced a major leadership change by replacing CEO Karen Lynch with David Joyner amid financial challenges and a Q3 profit warning. The healthcare conglomerate is grappling with rising costs, federal scrutiny, and potential divestiture of its Aetna insurance business. This shakeup mirrors the struggles faced by rival Walgreens Boots Alliance (WBA, Financial), with both companies experiencing significant stock declines this year.
Netflix (NFLX, Financial) contributed to a rally on Wall Street, bolstering the S&P 500 index to a record weekly win streak. The streaming giant's post-earnings surge helped lift tech-heavy indices, highlighting the market's resilience amid broader economic concerns. Investors remain optimistic, buoyed by strong bank earnings and economic data suggesting a soft landing for the economy.
UBS Global Wealth Management has upgraded its view on U.S. equities, citing the growing adoption of artificial intelligence and favorable economic conditions, including China's stimulus measures. The investment bank's positive outlook reflects expectations for continued market gains, supported by durable economic growth and rising real wages.
Bunge (BG, Financial) and Archer Daniels Midland (ADM, Financial) saw stock declines following a downgrade of peer Ag Growth International by Raymond James. The downgrade reflects concerns over macro headwinds in the agriculture sector, including weak crop prices and elevated dealer inventories, impacting grower purchase decisions.
Blackstone (BX, Financial) extended its winning streak, closing up for the seventh consecutive day. The investment firm reported strong Q3 earnings, driven by increased investment activity and fund appreciation, marking its best performance in three years.
Zeta Global (ZETA, Financial) shares fell after Barclays downgraded the stock, citing challenges in growth prospects for FY25. The brokerage expressed concerns over valuation and investor focus on improving margins versus revenue growth, affecting the company's future outlook.
Cadence Design Systems (CDNS, Financial) and Synopsys (SNPS, Financial) are being overlooked in the semiconductor sector despite their potential in electronic design automation. Investment firm Baird notes that these stocks are lagging due to concerns over the semiconductor cycle, but expects their resilience in R&D expenditure to outweigh current market pressures.
SLB (SLB) shares dropped after reporting Q3 earnings that edged past estimates but warned of weak international spending due to lower commodity prices. Despite this cautious outlook, the company remains optimistic about achieving its full-year EBITDA margin targets through cost-cutting measures.
Vistra (VST) continues to perform strongly, regaining its position among the top S&P 500 performers. J.P. Morgan highlights the company's strategic advantages in the Texas power market and potential catalysts from nuclear contracting opportunities.
Humana (HUM) saw a slight uptick amid takeover speculation, with reports suggesting interest from Cigna (CI) and a Western European company. The speculation follows previous merger discussions between Humana and Cigna that were ultimately abandoned.
Albertsons (ACI) rose following a Wells Fargo upgrade, as the firm anticipates a positive outcome from its merger resolution with Kroger (KR). The analyst sees potential upside from strategic initiatives and digital engagement, enhancing the company's long-term value.
Philip Morris (PM), British American Tobacco (BTI), and Japan Tobacco have proposed a C$32.5B settlement to resolve tobacco-related claims in Canada. The settlement aims to conclude litigation following a significant damages ruling in a Quebec court.
Acadia Healthcare (ACHC) faces scrutiny from the Veterans Affairs Department over allegations of fraudulent billing practices. This investigation adds to the company's existing legal challenges and potential inquiries from federal regulators.
CVS Health (CVS, Financial) shares fell following the announcement of a new CEO and disappointing preliminary Q3 financials. The leadership change and financial outlook have raised concerns among investors, contributing to the stock's decline.
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