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True to form, the dip on Tuesday was greeted with buy-the-dip interest on Wednesday that featured the outperformance of the small-cap stocks and cyclical sectors, both of which were helped by the reassuring earnings reports out of the financial sector.
Today, market participants don't have to contend with the buy-the-dip question. They are just buying more, evidenced by an equity futures market that sports a positive disposition largely because Taiwan Semiconductor Manufacturing Company (TSM) put up some impressive Q3 results and issued better-than-expected Q4 guidance.
Shares of TSM are up 8.8% in pre-market trading and have provided a wide coattail for other semiconductor stocks, and AI plays, to ride. That includes NVIDIA (NVDA), which is up 3.1%, and the usual lineup of mega-cap stocks.
Currently, the S&P 500 futures are up 30 points and are trading 0.5% above fair value, the Nasdaq 100 futures are up 202 points and are trading 1.0% above fair value, and the Dow Jones Industrial Average futures are up 75 points and are trading 0.2% above fair value.
The good news out of Taiwan Semiconductor Manufacturing Company has meshed nicely with earnings reports from Alcoa (AA), Blackstone (BX), and Dow component Travelers (TRV), all of which posted better-than-expected results for the September quarter.
Not the case for Elevance Health (ELV), which is getting slammed after coming up well shy of the consensus earnings estimate and issuing worse-than-expected FY24 EPS guidance. Shares of ELV are down 12.8% and are weighing on other managed care stocks.
The batch of economic data released at 8:30 a.m. ET, meanwhile, is weighing on the Treasury market. Why? Because it was better than expected, inviting a contention that perhaps the Fed won't need to cut rates as much as the market has been anticipating. The 2-yr note yield is up four basis points to 3.98% and the 10-yr note yield is up five basis points to 4.07%.
- Initial jobless claims for the week ending October 12 decreased by 19,000 to 241,000 (Briefing.com consensus 270,000). Continuing jobless claims for the week ending October 5 increased by 9,000 to 1.867 million.
- The key takeaway from the report is that it is muddled by the effects of the hurricanes, yet it is being greeted with a sense of pleasant surprise that initial jobless claims were much better than feared.
- September retail sales increased 0.4% month-over-month (Briefing.com consensus 0.2%) following an unrevised 0.1% increase in August. Excluding autos, retail sales increased 0.5% month-over-month (Briefing.com consensus 0.1%) following an upwardly revised 0.2% increase (from 0.1%) in August. Control group sales, which factor into GDP computations, were up 0.7%.
- The key takeaway from the report is that consumer spending on goods accelerated in September with notable increases seen in many discretionary categories like miscellaneous store retailers (+4.0%), clothing and clothing accessories (+1.5%), and food services and drinking places (+1.0%). This is a "no landing" type of report.
- The October Philadelphia Fed Index increased to 10.3 (Briefing.com consensus 4.0) from 1.7 in September, led by a jump in the new orders index to 14.2 from -1.5. The dividing line between expansion and contraction is 0.0.
- The key takeaway from the report is that manufacturing activity in the Philadelphia Fed region accelerated in October with future indicators also suggesting more widespread expectations for growth over the next six months.
This encouraging economic news followed shortly after the European Central Bank (ECB) announced that it had voted to lower the deposit facility rate, the marginal lending facility rate, and the main refinancing operations rate by 25 basis points each. This decision was widely expected and it marks the first time in 13 years that the ECB cut rates at consecutive policy meetings.
The Fed for its part is still expected by the fed funds futures market to cut the target range for the fed funds rate by another 25 basis points at the November FOMC meeting. That remains music to the ears of the stock market, which is still dancing to the beat of economic and policy optimism.
