Monday featured another low-volume advance for the major indices and another round of new highs for the Dow Jones Industrial Average, market cap-weighted S&P 500, equal-weighted S&P 500, and S&P Midcap 400.
There is a basis to keep those streaks going today.
Goldman Sachs (GS), Bank of America (BAC), Citigroup (C), and Charles Schwab (SCHW) are higher after each of them reported quarterly results that were better than expected. The geopolitical temperature has been turned down a bit, too, following reports that Israel is likely to retaliate against Iran by striking military targets instead oil and/or nuclear facilities. And Treasury yields are moving lower.
The latter has been helped by the pullback in oil prices and other commodity prices, which has also been influenced by a Wall Street Journal report that President Xi’s aim with stimulus efforts is to avert a financial crisis in China and not massively stimulate demand.
The October New York Fed Empire Manufacturing Survey was a mixed bag. The headline print of -11.9 (Briefing.com consensus 2.0; prior 11.5) was ugly, led by a drop in new orders (to -10.2 from 9.4). The dividing line between expansion and contraction is 0.0. An offset to the disappointing headline print was the uptick in the indexes for number of new employees (to 4.1 from -5.7) and the average employee workweek (to 4.7 from 2.9).
The 2-yr note yield is unchanged from Friday’s cash settlement at 3.94% while the 10-yr note yield is down two basis points to 4.05%.
Stocks are not expected to do much at today’s open.
Dow component UnitedHealth Group (UNH) is down 4.5% in the wake of its earnings report that was better than expected, but included an increase in the medical care ratio and FY24 EPS guidance that was only in-line with expectations. Fellow Dow component Johnson & Johnson (JNJ) is down 1.6% after topping Q3 earnings estimates, but providing an EPS forecast of $9.88-9.98 for FY24 that has a midpoint below the current FactSet consensus estimate.
NVIDIA (NVDA) for its part is down 0.8% on a Bloomberg report that the Biden administration is looking at curbing sales of advanced AI chips to certain countries, with a focus on Persian Gulf countries.
Currently, the S&P 500 futures are up three points and are trading fractionally above fair value, the Nasdaq 100 futures are up 13 points and are trading fractionally above fair value, and the Dow Jones Industrial Average futures are down nine points and are trading fractionally below fair value.
Given the scope of gains since the August lows — and all year for that matter — a flattish open shouldn’t be regarded as a disappointment. It’s more a picture of the resilience to selling interest that has been a feature of this bull market.
Market participants, therefore, are watching closely to see if that resilience breaks for a market sporting a full, if not rich, valuation that has been tolerated because of earnings growth that has continued to impress.
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Originally Posted October 15, 2024 – Watching for a break in resilient disposition
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