Key Takeaways
- Retail sales spike initially, markets stabilize later.
- Strong China GDP eases dollar pressure.
- Earnings season begins with mixed results
A stronger than expected Retail Sales report sent markets lower to start the day on Tuesday; however, stocks displayed an encouraging amount of resiliency to close relatively unchanged. The S&P 500 was more or less unchanged while the Nasdaq Composite fell 0.3%. With wars raging, a domestic political mess and now earnings season, I think we’re going to find out sooner than later if the market is on solid footing or not.
Tuesday’s Retail Sales report showed an increase of 0.7%, above expectations for 0.3% growth. The strong performance was accompanied by a revision to August’s report which was showed sales increased from up 0.6% to up 0.8%. Bonds fell in the wake of the report sending yields on ten-year and two-year notes to their highest levels of the year. Despite the continued strength in the economy, projections for an interest rate hike by the Federal Reserve remain low according to the CME. As things stand currently, the Fed is unlikely to raise rates again this year.
Overseas, China reported third quarter GDP growth of 4.9% led by a resurgence in consumer demand. The better than forecast number was welcome news for what has been a rather sluggish economy and is closer to being in line with the government’s goal of 5% growth. The report also helped to ease concerns over additional stimulus measures, which in turn pushed the U.S. dollar lower.
There is undoubtedly a lot going on in the world right now, but from the perspective of markets, earnings are likely to take center stage. Overnight, Procter and Gamble reported better than expected revenue and earnings. However, the gains were largely attributable to higher prices as overall volume fell 1%. In premarket trading, shares of Procter and Gamble are higher by just under 1.5%.
Dutch firm ASML also reported earnings. Despite a beat on profits, shares of ASML are down just over 3% premarket following a disappointing 2024 forecast. The company makes machines used in producing advanced computer chips and plays an outsized role in the overall chip sector. The weaker than expected forecast is reverberating throughout the sector sending shares of a number of chip companies lower. In addition to the disappointing outlook, further trade restrictions on advanced chip technology being put into place by the Biden Administration are adding pressure to shares of chip stocks.
After the close today, Netflix
NFLX
will report earnings. In addition to top and bottom line growth, there are a few metrics to which I’ll be paying particular attention. Netflix is forecast to report $8.53B in revenues and 6.2M new subscribers. Some key metrics supporting those numbers will be how many people are signing up for the ad supported pricing plan along with the password sharing crackdown. I’m also interested to see if the company announces any new pricing tiers.
Tesla
TSLA
is also scheduled to report after the close. The electric vehicle maker has been aggressively cutting prices throughout the year in an attempt to gain market share. However, that has come at the expense of compressing margins. Therefore, I’ll be listening for more information regarding margins. I’m also interested in 2024 delivery guidance. Included in that could be additional information on Tesla’s cyber truck and I’m curious to learn where things stand with delivery expectations of that.
In premarket activity, the S&P 500 is down just under 0.5% and the Nasdaq is down just over 0.5%. Volatility is up 2.25% with the VIX over 18. Oil prices are higher by over 2% following the better than expected numbers out of China and war in the Middle East. With so many volatile situations at the moment, I’m not at all surprised to see volatility ticking higher and we’ll see whether or not tonight’s earnings add to existing concerns or help to calm investors. As always, I would stick with your investing plans and long term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.
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