October 23rd Market Overview

Happy Wednesday everyone.

The market is seeing red today with broad-based selling pressure, with the Dow down over 400 points toward its worst session in over a month.

Treasury yields pushing past 4.25%, while an unexpected E. coli outbreak at $MCD adds significant pressure to the Dow.

Earnings season continues to paint a mixed picture.

Let's dig in...

Executive Summary

• Major indices extend losses, with Dow dropping 439 points on rising yields and $MCD concerns
  

• Treasury yields surge past 4.25%, reaching highest levels since July 26, up 44 basis points in October alone
  

• Housing market shows continued strain with existing home sales hitting lowest level since 2014
  

• Corporate earnings reveal mixed landscape with notable beats from $KO and $BSX, while $BA reports significant losses

Market Overview

Today’s decline puts both the Dow and S&P 500 at risk of losing their monthly gains, though YTD performance remains strong with the S&P 500 and Nasdaq up over 21% and the Dow up 12%.

Key Market Drivers

1. Treasury yields surge past 4.25%, reaching levels not seen since July

2. Existing home sales fall to 3.84 million annualized rate, lowest since October 2010

3. E. coli outbreak linked to $MCD affecting consumer sentiment

4. Growing concerns over fiscal deficits and potential political impact on markets

Stock Spotlight

• $MCD: Shares plunge 5% after CDC reports E. coli outbreak linked to Quarter Pounders, resulting in 10 hospitalizations and one death
  

• $BSX: Reports exceptional Q3 with revenue up 19.4% YoY, raises full-year guidance significantly above expectations
  

• $KO: Beats estimates with EPS of $0.77 vs $0.74 expected, organic revenue growth of 9% despite currency headwinds
  

• $BA: Reports largest quarterly loss since 2020, with negative free cash flow of $1.96B, though stock shows resilience

Big Name Updates

• $AAPL: Bernstein maintains outperform rating ahead of Q4 earnings, noting historically stable performance during this period
  

• $MSFT: Citi adjusts price target to $497, citing mixed setup into FQ1 but expects positive sentiment shift post-earnings
  

• $AMZN: Launches new discount store targeting $20 price points to compete with Temu
  

• $TSLA: Benefits from China’s announcement of pilot program to fully electrify public sector vehicles

Other Notable Company News

• $SBUX: Shares decline after reporting weak preliminary Q4 results, with global comparable sales down 7% YoY
  

• $QCOM: Faces setback from ARM’s 60-day notice to cancel chip design license
  

• $SNAP: Receives upgrade from JMP Securities with $17 price target on upcoming product launches
  

• $UBER: BofA raises price target to $96, citing expectations for strong Q3 bookings

Sector Watch

Bond Market

Ten-year Treasury yields continue their October rise, up 44 basis points this month alone.

This movement reflects growing concerns about fiscal deficits and recent economic data suggesting persistent inflationary pressures and I think the market overall is having a hard time pricing in the elections next month.

Policy Watch

Former Kansas City Fed President Esther George warns of “tremendous pressure” on Fed policy due to U.S. debt levels, suggesting a more gradual approach to rate cuts and potentially higher long-term rates than previously anticipated.

What to Watch

1. $AAPL Q4 Earnings:

• Mixed datapoints heading into results

• iPhone cycle strength key focus

• China regulatory environment developments

2. Treasury Yield Movement:

• Impact on growth stocks

• Potential for further pressure on housing market

• Fed policy implications

3. $MCD Health Crisis Development:

• Consumer confidence impact

• Potential sales implications

• Brand reputation management

4. Retail Holiday Season Outlook:

• UBS notes improved consumer confidence

• Reduced inflation concerns

• Positive outlook for $DKS, $PVH, $TJX

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Thanks for reading 🙂

- John