Intraday Market Update
US equities gapped higher at the open after a slew of positive earnings reports from major US corporations. Dow members Caterpillar, McDonalds, Travelers and AT&T all posted positive reports. Meanwhile, economic data showed a positive weekly jobless claims report, while the headline Philly Fed survey number for October showed that manufacturing in the region is returning to growth after two months of contraction. However, the upbeat earnings results and positive economic data have not been enough to keep equities afloat as investors continue the debate about just how much the Fed will commit to their second round of quantitative easing. All of the major indexes are well off of their highs and now in negative territory. The Russell 2000 is leading the way lower with nearly a -1.50% loss. The US Dollar is showing strength and appears as though it is trying to make a higher swing low after the surge on Tuesday and reversal yesterday. This is putting pressure on commodities (and stocks) with front month crude oil down nearly -2.5%, gold down -1.6%, silver down -3.0%, and natural gas down nearly -5% on a higher than expected build in weekly inventories. Overseas, the Asia-Pacific region was mixed, while European markets posted solid gains on positive manufacturing data out of the region.
After an upward revision of +13,000 in the prior week, initial jobless claims for the week of 10/16 posted a -10,000 drop. This sent the four-week moving average down -4,250 to 458,000, which is a drop of more than -6,000 m/m and the lowest level since July. Continuing claims are now at their lowest level of the recovery with the four-week moving average down to 4.478 million. The improvement in continuing claims points to new hiring and, unfortunately, the expiration of benefits as workers who can not find jobs fall out of the insured pool.
Although the headline Philly Fed Survey has returned to expansion, some of the underlying components are struggling. The new orders sub-component came in at -5 in October and continues to show m/m contraction, albeit at a slower rate than -8.1 in September and -7.1 in October. Contraction in backlog orders also remains at -8.9 compared to -8.5 in September. And inventories are plummeting at -18.6 in October following -16.7 in August -11.6 in July. On the positive side shipments are holding steady and employment has improved for two consecutive months, but the decline in orders leaves questions about future gains in shipments and employment.
In equities, McDonalds (MCD) is up more than +1% but well off its fresh all time highs earlier in the session after the company beat earnings estimates and reported good comps across all of its regions. Caterpillar beat on the bottom line, while revenues met expectations. CAT is down more than -2%, despite offering strong revenue forecast. Competitor Terex (TEX) is down more than -8% after reporting an unexpected quarterly loss. Shares of AT&T (T) are down more than -1% after meeting earnings expectations. UPS is down more than -1% after beating on the bottom line but slightly missing revenues.
In tech land, Semiconductor firms Xilinx (XLNX) and Cypress (CY) both reported revenues that were below estimates. XLNX offered weak q/q guidance, while CY's CEO warned that their Q4 revenue would be lower. XLNX has lost more than -4% while CY has gained more than +4%. Netflix (NFLX) has gained more than +11% after coming in ahead of earnings estimates, but some analysts are hinting there is softness in the firm's guidance.
Core Sector List:
Overall reading: 3 sectors advancing, 17 sectors declining
Strongest Sectors: Retail, Home Construction, Insurance
Weakest Sectors: Miners, Broker Dealers, Semi's
S&P 500 - Daily and Hourly Charts:
Dow Jones - Daily and Hourly Charts:
NASDAQ - Daily and Hourly Charts:
Russell 2000 - Daily and Hourly Charts: