(Bloomberg) -- Stocks rose for the first time this week, with traders parsing a slew of corporate earnings for clues on the health of the world’s largest economy. Treasuries rebounded after days of losses.
A gauge of the “Magnificent Seven” hit a three-month high, with Tesla Inc. up 20% after Elon Musk’s electric-vehicle giant reported strong earnings and forecast as much as 30% growth in car sales next year. United Parcel Service Inc. — a barometer of economic activity — jumped 5% after returning to sales and profit growth. International Business Machines Corp. and Honeywell International Inc.’s results failed to inspire.
“Despite the possibility of more volatility as we get deeper into earnings season and close in on the November election, the market’s longer-term outlook remains solid,” said Daniel Skelly at Morgan Stanley’s Wealth Management Market Research & Strategy team.
The market barely budged after Thursday’s economic data, with new home sales beating estimates, initial jobless claims dropping and business activity expanding at a solid pace.
“Goldilocks data that’s in-line with expectations (so not too good or too bad) is the best outcome for a continued rebound in stocks and bonds,” said Tom Essaye at The Sevens Report.
The S&P 500 rose 0.2%, reclaiming its 5,800 mark. The Nasdaq 100 climbed 0.7%. The Dow Jones Industrial Average dropped 0.3% — poised for a fourth consecutive day of losses — the longest losing streak since June.
US 10-year yields declined five basis points to 4.19%. Thursday’s $24 billion five-year TIPS auction drew the lowest auction yield this year as inflation-protected Treasuries have outperformed since the Federal Reserve cut rates last month.
Oil slipped as oversupply concerns overshadowed the possibility of an Israeli retaliatory strike on Iran.
“The market appears to be driven by the projected outcome of the earnings reporting period, the presidential election, and the bond market’s interpretation of future monetary actions by the Federal Reserve,” said Sam Stovall at CFRA. “Investors see the resiliency of the economy and employment forcing the Fed to be ‘slower to lower’ on rates. We still see two 25 basis-point rate cuts in 2024.”
This week’s equity slide did little to dent the wall of bullish technical signals built up around the S&P 500. The US stock benchmark continues to trade comfortably above its 200-day moving average, clocking more than 240 straight days above the closely watched long-term line.
In the prior 13 instances when the S&P 500 closed above its 200-day average for at least 242 consecutive days, with the index less than 3% below a record, the gauge proceeded to post a median gain of 7.2% in the next six months, advancing in all but two cases, SentimenTrader’s analysis found.
“Near term, pullbacks/profit-taking should be expected given the uncertainties around the upcoming US presidential election, geopolitical uncertainty, and the earnings parade,” said Craig Johnson at Piper Sandler. “No change to our 2024 year end S&P 500 price objective of 6,100.”
“We see room for US stocks to move higher. We hold an Attractive view on the IT sector, as well as the utilities, financials, consumer discretionary, and communication services sectors,” said Solita Marcelli at UBS Global Wealth Management.
Chris Senyek at Wolfe Research notes that market concentration is at the highest levels since the 1960’s “Nifty Fifty” era — with the top seven companies accounting for about 30% of the market weight and the top 25 companies at 48%.
During the 1960’s and 1970’s, these market darlings were characterized by their consistent earnings growth and highprice-to-earnings ratios similar in respects to the “Magnificent Seven”, he said. Ultimately, what broke the trend was the inflationary environment of the 1970’s and the ensuing mid-70’s and early 80’s recessions.
“In a similar vein, we don’t see current trends breaking until the next recession and/or when AI enthusiasm substantially wanes,” Senyek added. “With that said, we remain bullish on the market broadening out consistent with our call to own earlier cyclical stocks (FINs is our favorite).”
Corporate Highlights:
- Boeing Co. Chief Executive Officer Kelly Ortberg’s quest to stabilize the struggling US planemaker suffered a stinging setback after factory workers rejected a new labor contract that would have increased their wages by 35% over four years.
- American Airlines Group Inc. boosted its full-year profit guidance, highlighting progress rebuilding from a failed sales strategy while it grapples with persistently high costs.
- Southwest Airlines Co. reported third-quarter profit more than double Wall Street’s estimates, a needed boost as the carrier tries to shore up financial results following a bruising fight with activist Elliott Investment Management that came to an end Thursday.
- ServiceNow Inc. reported strong third-quarter sales and bookings as the software company expands its suite of AI tools.
- Whirlpool Corp., the owner of Maytag, reported better than expected earnings, and reaffirming its full-year sales forecast.
- Harley-Davidson Inc.’s motorcycle shipments fell in the latest quarter on lower demand for its high-margin bikes, prompting a downward revision in its full-year forecast.
- Lam Research Corp. reported better-than-expected first quarter results. Analysts note that investors will welcome this report after ASML’s weak report earlier this month.
- T-Mobile US Inc. reported more monthly mobile-phone and broadband subscribers that analysts expected, leading it to raise forecasts for new customers and earnings this year.
- Newmont Corp. slumped after investors soured on earnings results that suggest the top gold producer is struggling to control mining costs and capitalize on surging bullion prices.
Key events this week:
- US durable goods, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.2% as of 1:31 p.m. New York time
- The Nasdaq 100 rose 0.7%
- The Dow Jones Industrial Average fell 0.3%
- The MSCI World Index rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.4% to $1.0821
- The British pound rose 0.4% to $1.2974
- The Japanese yen rose 0.8% to 151.61 per dollar
Cryptocurrencies
- Bitcoin rose 1.4% to $67,544.55
- Ether was little changed at $2,512.54
Bonds
- The yield on 10-year Treasuries declined five basis points to 4.19%
- Germany’s 10-year yield declined four basis points to 2.27%
- Britain’s 10-year yield advanced four basis points to 4.24%
Commodities
- West Texas Intermediate crude fell 1% to $70.09 a barrel
- Spot gold rose 0.7% to $2,735.30 an ounce
This story was produced with the assistance of Bloomberg Automation.
©2024 Bloomberg L.P.