Daily Markets: Bevy of Earnings for Markets to Digest

Today’s Big Picture

Asia-Pacific equity markets finished the day higher except for India’s SENSEX, which fell 0.81% and South Korea’s KOSPI, which saw losses in Energy Materials names edge out what would have been a broad rally as the index declined 0.85%. Australia’s ASX All Ordinaries ended the day flat, up a mere 0.01% while Taiwan’s TAIEX rose 0.30%, China’s Shanghai Composite gained 0.40%, Hong Kong’s Hang Seng advanced 0.55%, and Japan’s Nikkei closed 0.67% higher as that market responded to yesterday’s improving U.S. sentiment. European markets are mixed in midday trading, and U.S. equity futures point to a mixed open as shares of Dow component Microsoft (MSFT) are seeing a strong bid in pre-market trading.

We are in the middle of the Fed’s pre-meeting blackout period and with modest economic releases today, the market’s focus will be on quarterly earnings and guidance. Today will see the greatest number of companies reporting those results thus far in the current earnings season (~290 companies) but it will move up another notch tomorrow (~340 companies). As important as the actual results are, the response by investors will confirm delight or reveal disappointment in what they hear. Given the number of uncertainties currently influencing investor sentiment, unless a company’s results and guidance clear all hurdles, odds are its stock will come under pressure like we are seeing this morning with Alphabet (GOOG, GOOGL) shares.

When quarterly results from competitors, customers, and suppliers are released and assessed, a clearer picture of industry dynamics will be had. That will offer context to better gauge a company’s quarterly results and whether the impact on its stock was warranted or if it presents an opportunity. For Alphabet, that means digging through earnings later this week and next from Amazon (AMZN) and Meta Platforms (META). As we digest the barrage of quarterly earnings, the market will continue to contemplate developments in the Middle East as well as ongoing Republican efforts to find a House Speaker.

Data Download

International Economy

The Ifo Business Climate indicator for Germany rose by 1.1 points from the previous month to 86.9 in October, marking the first increase in six months and exceeding the market consensus of 85.9. Sentiment improved among manufacturers (-15.9 vs -16.2), service providers (-1.5 vs -4.9), and constructors (-31.1 vs -31.2), but deteriorated among traders (-27.2 vs -25.0).

The International Monetary Fund warned that the war between Israel and Hamas is already impacting Middle Eastern economies and could lead to long-term economic damage.

At 10 AM ET, the Bank of Canada will render its latest interest rate decision and is expected to keep rates unchanged at 5%.

Domestic Economy

If it’s Wednesday, that means the latest weekly data will be published for the MBA Mortgage Applications Index and crude oil inventory data from the Energy Information Administration. Today also brings September New Home Sales data, and the market consensus sees it nudging ahead to 0.68 million from 0.675 million in August.

Markets

Energy (-1.41%) continued to trade off and was the only down sector yesterday as equities enjoyed an overall up day. The Utilities sector was the biggest gainer, up 2.57% boosted by NextEra Energy (NEE) rising 6.99% as traders returned to the name following its early October plunge. Real Estate (1.26%) rallied after the 10-year treasury yield ticked below 5%. The 10-year treasury is often used to help set mortgage rates for many lenders so any decline in that yield is well-received by that sector. Materials and Communications Services followed, with both gaining 1.18%.

The Dow rose 0.62%, the S&P 500 advanced 0.73%, the Russell 2000 added 0.82% and the Nasdaq Composite closed 0.93% higher. Going against the tide was TransUnion (TRU) which cratered 23.30% after reporting a weak quarter and taking down guidance. Competitor Fair Isaac Corporation (FICO) traded off in sympathy, down 7.02% at the close.

Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: -0.02%
• S&P 500: 10.63%
• Nasdaq Composite: 25.54%
• Russell 2000: -4.64%
• Bitcoin (BTC-USD): 103.83%
• Ether (ETH-USD): 48.89%

Stocks to Watch

Before U.S. equity markets begin trading today, ADP (ADP), Boeing (BA), Deutsche Bank (DB), General Dynamics (GD), Hilton (HLT), MSC Industrial (MSCI), Norfolk Southern (NSC), Thermo Fischer (TMO), and T-Mobile USA (TMUS) will be among the companies reporting their latest quarterly results.

In pre-market action, shares of Westinghouse Air Brake Technologies (WAB) and Microsoft (more below) are trending higher after reported earnings while Alphabet (more below) is coming under pressure following its latest earnings release.

Microsoft shares traded up in extended-hours trading after the company posted September quarter results that topped expectations, aided by strong growth in its Azure cloud. For the quarter, Microsoft earned EPS of $2.99 on $56.52 billion in revenue with $24.26 billion from its intelligent cloud unit. Cloud services revenue, which is mostly comprised of Azure, grew 29%, or 28% YoY in constant currency. Shares are up 3.62% in pre-market trading.

By comparison, shares of Alphabet are over 6.50% lower this morning as investors focus on its Google Cloud business. Total revenue for the quarter grew 11% to $76.69 billion vs. the $76.02 billion consensus, breaking a string of single-digit revenue gains in recent quarters. While Alphabet’s other businesses topped consensus expectations for the quarter with Search and Other up 11.3% YoY and YouTube up 12.5%, Google Cloud posted a 22.5% revenue increase for the quarter, missing the consensus forecast and slower than the 27% YoY growth posted in the June quarter. Operating margins at Google Cloud also fell to 3.1% in the September quarter from 4.9% in the previous one.

Visa (V) posted better-than-expected September quarter revenue and earnings as payments volume, cross-border volume, and payment transactions stayed resilient. For fiscal full-year 2024, Visa expects, on a non-GAAP nominal-dollar basis, EPS growth in the low teens, annual net revenue growth in the high single-digits to low double-digits, and annual operating expense growth in high single-digits.

Snap (SNAP) reported EPS of $0.02 versus the -$0.05 consensus while revenue for the September quarter came in at $1.19 billion, also ahead of the $1.1 billion consensus. Daily Active Users increased 12% YoY in 3Q 2023 to 406 million. Snap expects revenue of $1.32- $1.38 billion in the current quarter vs. the market forecast of $1.33 billion.

Texas Instruments (TXN) shares fell after the company posted third-quarter results and guidance that missed expectations by a wide margin. For the current quarter, the company expects sales to be between $3.93-$4.27 billion, below the $4.49 billion consensus forecast. EPS for the current quarter was guided to $1.35-$1.57, well below the $1.76 consensus.

Shares of Teladoc Health (TDOC) were under pressure after the market closed last night following the virtual healthcare services provider issued soft guidance and announced an operational review of its business.

Shares of SunPower (SPWR) fell in aftermarket trading last night after the company disclosed it will restate its year-end 2022 10-K and 2023 Q1 and Q2 financial statements, saying it found a material weakness in its internal controls over financial reporting.

General Motors (GM) Cruise self-driving vehicle company said it would pause operations of its autonomous vehicles (AVs) in San Francisco after the California Department of Motor Vehicles (DMV) suspended its deployment and driverless testing permits.

Apple (AAPL) sent invites for a launch event that will be streamed on its website on October 30 at 8 PM ET. The tagline for the event is “scary fast,” which suggests Apple Silicon news and potentially new Mac products. Other reports indicate Apple's short-term financing solution, Apple Pay Later is now available to all eligible users in the U.S. Apple Pay Later enables customers to split purchases between $75 and $1,000 across a six-week payment plan.

IPOs

Readers looking to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Ameriprise Financial (AMP), CACI International (CACI), Equinix (EQIX), IBM (IBM), KLA Corp. (KLAC), Mattel (MAT), Meta Platforms (META), Pilgrim’s Pride (PPC), ServiceNow (NOW), United Rentals (URI), and Whirlpool (WHR) report quarterly results after equities stop trading. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Thursday, October 26

• Eurozone: European Central Bank Interest Rate Decision
• US: Weekly Initial & Continuing Jobless Claims
• US: Durable Orders – September
• US: 3Q 2023 GDP – Initial
• US: Pending Home Sales – September
• US: Weekly EIA Natural Gas Inventories

Friday, October 27

• Japan: Tokyo CPI - October
• US: Personal Income & Spending, PCE Price Index – September
• US: The University of Michigan Consumer Sentiment Index (Final) – October

Thought for the Day

“I learned very early the difference between knowing the name of something and knowing something.” ― Richard Feynman

Disclosures

• Apple (AAPL), Microsoft (MSFT) are constituents of the Tematica Research Thematic Dividend All-Stars Index

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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