Stocks closed mostly higher Thursday, though disappointing earnings from one blue chip tech stock kept pressure on the Dow Jones Industrial Average. The earnings calendar wasn't the only focus for market participants today, with a fairly stacked economic calendar also drawing attention.
Starting with today's earnings reports. International Business Machines (IBM) stock slumped 6.2% as the global technology company's top-line miss offset a bottom-line beat.
The company said it expects fourth-quarter revenue growth to be similar to the third quarter's 1.5% year-over-year increase and full-year free cash flow to top $12 billion.
CFRA Research analyst Brooks Idlet maintained a Buy rating on the blue chip stock after earnings, saying he expects a rebound for IBM in 2025 "as election uncertainty fades." Idlet believes this will be supported by a solid book-to-bill ratio, though the upside could be limited by lower pricing associated with longer-duration generative AI contracts.
IBM's post-earnings weakness weighed on the Dow, with the 30-stock index closing down 0.3% at 42,374.
The S&P 500 (+0.2% at 5,809) and Nasdaq Composite (+0.8% at 18,415), on the other hand, both finished higher thanks to a big post-earnings pop in one mega cap.
Tesla has second-best day ever
Specifically, Tesla (TSLA) stock surged 21.9% – its second-best day ever, according to Morningstar – after the electric vehicle (EV) maker topped earnings expectations for its third quarter and its profit margin improved thanks to higher "regulatory credit revenues."
Sentiment also got a lift after Tesla CEO Elon Musk said in the company's earnings call that his "best guess" is that vehicle deliveries will grow by 20% to 30% next year, more than analysts are expecting.
Wedbush analyst Daniel Ives admits that the automaker "has more wood to chop" and that its "recovery story has some challenges ahead." However, he also believes TSLA stock is a Buy, and Q3 "was a seminal quarter for Musk and Tesla to prove the doubters wrong with a very bullish forecast for 2025."
UPS jumps after Q3 earnings
United Parcel Services (UPS) was another post-earnings gainer, jumping 5.3% after the logistics giant beat top- and bottom-line expectations for its third quarter. Helping drive the upbeat results was strong average daily volume growth in the U.S., which rose nearly 6% from the year-ago period.
The industrial stock has underperformed the broader market this year, but Bernstein analyst David Vernon (Outperform, the equivalent of a Buy) remains hopeful.
In an October 21 note, Vernon wrote that the company has enough growth potential to warrant his bullish outlook. Additionally, its fat 5% dividend yield "is worth more in a falling rate environment."
Manufacturing activity continues to contract
In economic news, S&P Global said its Flash Manufacturing Purchasing Managers Index (PMI) rose to 47.8 in October from September's 47.3. Still, any readings below 50 indicate contraction. Meanwhile, S&P Global's Flash Services PMI ticked up to 55.3 from 55.2 in September.
"Economic activity accelerated this month as consumer spending on services remained buoyant," says José Torres, senior economist at Interactive Brokers. "The manufacturing segment was just the opposite, however, with conditions worsening as traditional purchasers were hampered by the pressures of lofty borrowing costs, elevated prices and reduced credit availability."
Torres adds that uncertainty surrounding the upcoming presidential election "is also weighing heavily as businesses think twice before investing in heavy machines and equipment." (You can stay up to date on election news with Kiplinger's live election blog.)
New home sales spiked in September
Also on the data docket today were new home sales, which rose 4.1% from August to September, hitting a seasonally adjusted annual rate of 738,000, according to the Census Bureau.
This follows Wednesday's data that showed existing home sales fell last month. "The U.S. housing market continues to be a story of two very different markets," says Eugenio Aleman, chief economist at Raymond James.
But while new home sales are improving, growth "remains weak and we don't expect it to strengthen until mortgage rates come down considerably," he adds.
