October 22nd Market Overview

Happy Tuesday everyone.

The markets are shaking off yesterday’s losses today.

Industrial names led the charge, with $GM's ripping earnings highlighting strong consumer demand despite macro headwinds.

China's latest stimulus efforts and mixed signals from Fed officials are keeping the markets on it’s toes.

Let's dig in...

Executive Summary

• Markets bounce with Dow erasing 200-point deficit -> up 0.12%, while broader indices hover near flatline

• Treasury yields breach 4.2% level for first time in three months, reflecting shifting rate cut expectations

• Corporate earnings show strength with $GM surging 10% on strong quarterly results and raised guidance

• Homebuilding stocks face pressure as persistent higher rates impact sentiment, with $LEN and $DHI each declining over 3%

Market Overview

I think today’s trading activity reflects a careful balance between strong earnings reports and mounting rate concerns.

The S&P 500 stretches its year-to-date gain beyond 22%.

Key Market Drivers

1. Corporate earnings momentum continues with 80% of reporting S&P 500 companies beating estimates

2. Rising bond yields pressuring growth and rate-sensitive sectors, particularly homebuilders

3. Fed officials’ divergent views on rate policy creating market uncertainty

4. China’s economic measures, including lending rate cuts, supporting commodity prices

Stock Spotlight

• $GM (▲10%): Delivered impressive Q3 results with EPS of $2.96 vs $2.40 expected, raised full-year guidance to $10.00-$10.50, and significantly boosted FCF outlook to $12.5B-$13.5B
  

• $MMM (▲5%): Beat expectations with EPS of $1.98 vs $1.90, raised FY24 guidance to $7.20-$7.30, demonstrating strong operational execution
  

• $GPC (▼20%): Posted significant earnings miss with EPS of $1.88 vs $2.42 expected, slashed guidance amid European market weakness
  

• $PM (▲9%): Strong Q3 performance driven by smoke-free business growth, raised annual profit forecast, reflecting 17% organic revenue growth

Big Name Updates

• $AAPL: Morgan Stanley projects September quarter beat but signals caution on forward guidance
  

• $MSFT: Plans autonomous AI agents launch next month, maintains $500 price target ahead of earnings
  

• $TSLA: Developing smartwatch app integration, addressing key user demand amid stock’s 12% YTD decline
  

• $NFLX: Strategic shift with AAA gaming studio closure despite recent positive earnings commentary

Other Notable Company News

• $QCOM overhauls mobile chips with Oryon technology integration, securing partnerships with Samsung and Xiaomi
  

• $ASML CEO signals continued growth for 2025 despite heightening US-China trade tensions
  

• $UBER exploring strategic acquisition of Amadeus IT group, potentially expanding digital footprint

Sector Watch

Bond Market

The 10-year Treasury yield surpassed 4.2%, marking a three-month high. This move reflects growing skepticism about aggressive rate cuts, futures markets now pricing an 89% probability of a quarter-point cut at the Fed’s November meeting.

Policy Watch

Fed officials present contrasting views on monetary policy direction:

• Fed’s Mary Daly advocates continued rate cuts, citing tight monetary conditions

• Kashkari and Schmid favor slower reduction pace, noting depleted consumer savings

• Market participants adjusting to possibility of more gradual policy normalization

What to Watch

1. $TSLA and $KO Earnings (Wednesday): Focus on:

   • EV delivery trends and margin outlook

   • Consumer demand indicators and pricing power

2. Treasury Yield Movement: 4.2% level remains critical resistance

   • Impact on rate-sensitive sectors

   • Potential influence on upcoming Fed decisions

3. China’s Economic Response: Further stimulus measures could affect global markets

   • Impact on commodity prices

   • Implications for companies with significant Chinese exposure

4. $HON Earnings (Thursday): Industrial sector barometer

   • Key indicators for manufacturing trends

   • Supply chain updates and margin trends

P.S. 
Please fuel my coffee pot with a quick click to our sponsor today. 

Thanks for reading 🙂

- John