Get all your news in one place.
100’s of premium titles.
One app.
Start reading
Barchart
Barchart
Rich Asplund

Stocks Finish Higher Ahead of Wednesday’s FOMC Decision

What you need to know…

The S&P 500 Index ($SPX) (SPY) Tuesday rose by +0.65%, the Dow Jones Industrials Index ($DOWI) (DIA) rose by +0.38%, and the Nasdaq 100 Index ($IUXX) (QQQ) rose by +0.52%.

Stocks on Tuesday closed moderately higher on mostly stronger-than-expected corporate earnings results.  On the positive side, Arista Networks closed up more than +14%, and Leidos Holdings closed up more than +7% after reporting stronger-than-expected Q3 revenue.  Also, GE Healthcare Technologies and Arch Capital Group Ltd closed up more than +4% after reporting Q3 adjusted EPS above the consensus.

On the negative side, VF Corp closed down more than -13% after reporting weaker-than-expected Q2 adjusted EPS from continuing operations and withdrawing guidance for the fiscal year.  Also, FMC Corp closed down more than -8% after reporting weaker than expected Q3 adjusted and forecasting Q4 adjusted EPS below consensus.  In addition, Caterpillar closed down more than -6% after reporting its Q3 order backlog decreased -$2.5 billion from Q2. 

Tuesday’s U.S. economic news was primarily bearish for stocks after the Oct consumer confidence index fell to a 5-month low, the Q3 employment cost index and Aug S&P CoreLogic home prices rose more than expected, and the Oct MNI Chicago PMI unexpectedly declined. 

In the Middle East, Iran’s foreign minister Tuesday called for the “last political opportunities” to be used to halt the Israeli-Hamas war. The United Nations warned the situation in Syria, which borders Israel and where many Iran-backed militias operate, is “at its most dangerous for a long time” as Israel increases airstrikes on the country. 

The U.S. Q3 employment cost index rose +1.1%, stronger than expectations of +1.0%.

The U.S. Aug S&P CoreLogic composite-20 home price index rose +2.16% y/y, stronger than expectations of +1.75% y/y and the biggest increase in 7 months.

The U.S. Oct MNI Chicago PMI unexpectedly fell -0.1 to 44.0, weaker than expectations of an increase to 45.0.

The Conference Board U.S. Oct consumer confidence index fell -1.7 to a 5-month low of 102.6; still, it was stronger than expectations of 100.5.

The markets are discounting a zero percent chance that the FOMC will raise the funds rate by +25 bp at this week’s FOMC meeting (Tue/Wed), a 27% chance for that +25 bp rate hike at the following meeting on Dec 12-13, and a 40% chance for that +25 bp rate hike at the FOMC meeting after that on Jan 30-31, 2024.  The markets are then expecting the FOMC to begin cutting rates later in 2024 in response to an expected slowdown in the U.S. economy.

The Treasury late Monday cut its net borrowing estimate for the October through December quarter to $776 billion, below its July prediction of $852 billion.  Despite the reduction in the estimate, the new projection still marks a record borrowing amount for the calendar fourth quarter.

U.S. and European bond yields Tuesday moved lower.  The 10-year T-note yield fell -1.4 bp to 4.880%. The 10-year German bund yield fell to a 2-week low of 2.755% and finished down -1.6 bp at 2.806%.  The 10-year UK gilt yield fell to a 2-week low of 4.453% and finished down -4.9 bp at 4.512%. 

Eurozone Oct CPI eased to +2.9% y/y from +4.3% y/y in Sep, weaker than expectations of +3.1% y/y and the smallest pace of increase in 2-1/4 years.  Oct core CPI eased to +4.2% y/y from +4.5% y/y in Sep, right on expectations and the smallest pace of increase in 1-1/4 years. 

The Eurozone Q3 GDP report of -0.1% q/q and +0.1% y/y was weaker than expectations of unch q/q and +0.2% y/y.

German Sep retail sales unexpectedly fell -0.8% m/m, weaker than expectations of +0.5% m/m.

The China Oct manufacturing PMI fell -0.7 to 49.5, weaker than expectations of no change at 50.2.  Also, the Oct non-manufacturing PMI fell -1.1 to 50.6, weaker than expectations of an increase to 52.0. 

The BOJ, as expected, kept its policy balance rate at -0.1% and maintained its 10-year JGB yield target at about 0% but tweaked its yield curve control and defined 1% as a "reference" and not a cap on 10-year yields.

Overseas stock markets Tuesday settled mixed.  The Euro Stoxx 50 closed up +0.81%.  China’s Shanghai Composite Index today closed down -0.09%.  Japan’s Nikkei 225 today closed up +0.53%.

Today’s stock movers…

Arista Networks (ANET) closed up more than +14% to lead gainers in the S&P 500 after reporting Q3 revenue of $1.51 billion, better than the consensus of $1.48 billion, and forecasting Q4 revenue of $1.50 billion-$1.55 billion, stronger than the consensus of $1.47 billion. 

Leidos Holdings (LDOS) closed up more than +7% after reporting Q3 revenue of $3.92 billion, stronger than the consensus of $3.78 billion, and raising its full-year revenue forecast to $15.1 billion-$15.3 billion from a prior forecast of $14.9 billion-$15.2 billion.   

Ecolab Inc (ECL) closed up more than +5% after reporting Q3 adjusted EPS of $1.54, above the consensus of $1.52, and forecast Q4 adjusted EPS of $1/48-$1.58, stronger than the consensus of $1.48. 

Eaton Corp (ETN) closed up more than +5% after reporting Q3 adjusted EPS of $2.47, stronger than the consensus of $2.34, and forecast Q4 adjusted EPS of $2.39-$2.49, well above the consensus of $2.37.

GE Healthcare Technologies (GEHC) closed up more than +5% to lead gainers in the Nasdaq 100 after reporting Q3 adjusted EPS of 99 cents, stronger than the consensus of 90 cents. 

Xylem (XYL) closed up more than +4% after reporting Q3 revenue of $2.08 billion, stronger than the consensus of $1.99 billion, and raising its full-year revenue forecast to $7.3 billion from a prior forecast of $7.2 billion.

Arch Capital Group Ltd (ACGL) closed up more than +4% after reporting Q3 operating EPS of $2.31, well above the consensus of $1.55.   

Boeing (BA) closed up more than +2% to lead gainers in the Dow Jones Industrials after Northcoast Research upgraded the stock to buy from neutral with a price target of $217.

Pinterest (PINS) closed up more than +19% after reporting 482 million active users, well above expectations of 473.46 million. 

VF Corp (VFC) closed down more than -13% to lead losers in the S&P 500 after it reported Q2 adjusted EPS from continuing operations of 63 cents, below the consensus of 64 cents, and withdrew guidance for the fiscal year. 

Catalent (CTLT) closed down more than -13% after Sarepta Therapeutics said a late-stage trial of its drug Elevidys in patients with Duchenne muscular dystrophy between the ages of 4 through 7 did not meet its primary endpoint. Catalent entered into a commercial supply agreement with Sarepta to manufacture the drug.   

FMC Corp (FMC) closed down more than -8% after reporting Q3 adjusted EPS of 44 cents, below the consensus of 45 cents, and forecast Q4 adjusted EPS of 89 cents-$1.38, the midpoint well below the consensus of $1.40.

Caterpillar (CAT) closed down more than -6% to lead losers in the Dow Jones Industrials after reporting its Q3 order backlog decreased -$2.5 billion from Q2. 

Hubbell Inc (HUBB) closed down more than -4% after reporting Q3 net sales of $1.38 billion, below the consensus of $1.39 billion, and said it agreed to acquire Northern Star Holdings for $1.1 billion in cash. 

ON Semiconductor (ON) closed down more than -4% to lead losers in the Nasdaq 100, adding to Monday’s -21% plunge after Baird downgraded the stock to neutral from outperform. 

Lattice Semiconductor (LSCC) closed down more than -17% after forecasting Q4 revenue of $166 million-$185 million, well below the consensus of $195.8 million.

Across the markets…

December 10-year T-notes (ZNZ23) on Tuesday closed down -1.5 ticks, and the 10-year T-note yield fell by -1.4 bp to 4.880%.  T-notes Tuesday gave up early gains and settled slightly lower as a stock rally curbed the safe-haven demand for T-notes.  Also, supply pressures weighed on T-notes ahead of Wednesday’s refunding announcement, when the Treasury is expected to announce it will sell $114 in T-notes and T-bonds for November’s quarterly refunding, unchanged from last quarter. 

T-notes Tuesday initially moved higher on have carryover support from rallies in European government bond markets.  The 10-year German bund yield and 10-year UK gilt yield fell to 2-week lows after Eurozone Oct CPI rose less than expected by the smallest amount in 2-1/4 years. T-notes also have support on expectations for the Fed to keep interest rates unchanged following the conclusion of the Tue/Wed FOMC meeting.

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.