The stock market is working with some familiar bearings today that typically point it in the right direction (i.e., higher). Those bearings include better-than-expected results and guidance from a mega-cap member and lower Treasury yields.
The mega-cap member is Tesla (TSLA), which comfortably exceeded the Q3 consensus EPS estimate, benefiting from a 195-basis points increase in its gross margin. Additionally, CEO Elon Musk excited investors with his “best guess” that vehicle growth will reach 20-30% in FY25 due to lower costs.
Shares of TSLA are soaring 14% in pre-market trading, which is giving the S&P 500 futures and Nasdaq 100 futures an added boost. The Dow Jones Industrial Average futures, though, are sagging under the weight of losses in IBM (IBM) and Honeywell (HON) after their earnings reports, and in Boeing (BA) following the news that the machinists union voted against the company’s latest contract proposal, which means the strike continues.
Currently, the S&P 500 futures are up 25 points and are trading 0.5% above fair value, the Nasdaq 100 futures are up 166 points and are trading 0.9% above fair value, and the Dow Jones Industrial Average futures are down 35 points and are trading 0.1% below fair value.
These indications are accounting for a huge slate of earnings results since yesterday’s close that included reports from other luminaries like Whirlpool (WHR), Mattel (MAT), Lam Research (LRCX), ServiceNow (NOW), Union Pacific (UNP), T-Mobile (TMUS), Northrop Grumman (NOC), Southwest Airlines (LUV), and UPS (UPS).
They also account for an initial jobless claims report that was better than expected.
Initial jobless claims for the week ending October 19 decreased by 15,000 to 227,000 (Briefing.com consensus 246,000). On an unadjusted basis, initial claims totaled 202,635, a decrease of 22,634 from the previous week. Continuing jobless claims for the week ending October 12 increased by 28,000 to 1.897 million.
The key takeaway from the report is that, while it might still contain some noise from the effects of the hurricanes, the initial claims data from both a seasonally adjusted and unadjusted basis connote a labor market that is still operating on solid ground that is a long way from recession-like territory.
Fittingly, Treasury yields moved up on the report, but they are still holding below yesterday’s settlement levels. The 2-yr note yield, which fell to 4.04%, has bumped up to 4.06%, which is three basis points below yesterday’s settlement. The 10-yr note yield hit 4.19%, but has bumped up to 4.22%, which is two basis points below yesterday’s settlement.
Treasury yields, then, are lower; they just aren’t as low as they once were earlier this morning. Market participants will be keeping a close eye undoubtedly on their movement, using it as a basis to carry on with a rebound effort or as a basis to sell into the strength presumably should the 10-yr note yield somehow finds its way back above 4.25%.
The release of the preliminary S&P Global U.S. Manufacturing and Services PMIs at 9:45 a.m. ET, and the September New Home Sales Report at 10:00 a.m. ET, will play a part in influencing the Treasury market’s direction.
For now, the excitement over Tesla’s report and outlook seems to be doing most of the driving.
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Originally Posted October 24, 2024 – Tesla doing the driving
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