U.S. equities finished mixed, as investors were treated to a host of data to chew on. Recent progress on the U.S.-China trade war and U.K. Brexit took a back seat to a flood of diverging data points from the economic and earnings fronts. The Dow came under pressure after 3M missed revenue forecasts and issued disappointing guidance, overshadowing upbeat results from Microsoft and Dow Inc. Meanwhile, Twitter was sharply lower after it missed top and bottom line estimates, while Tesla rallied after posting an unexpected profit to contrast competitor Ford’s lowered guidance. In heavy economic news, jobless claims came in lower than forecasts and a preliminary report from Markit showed manufacturing and services sector growth accelerated slightly, but durable goods orders fell more than expected. Treasury yields finished slightly higher, while the U.S. dollar, gold and crude oil prices also gained ground.
The Dow Jones Industrial Average (DJIA) lost 29 points (0.1%) to 26,805, while the S&P 500 Index inched 6 points (0.2%) higher to 3,010 and the Nasdaq Composite rose 66 points (0.8%) to 8,186. In moderate volume, 803 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil moved $0.26 higher to $56.23 per barrel and wholesale gasoline was up $0.02 at $1.63 per gallon. Elsewhere, the Bloomberg gold spot price advanced $10.03 to $1,502.15 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies— was up 0.2% at 97.66.
September preliminary durable goods orders fell 1.1% month-over-month (m/m), compared to the Bloomberg estimate of a 0.7% decline and August’s upwardly-revised 0.3% gain. Ex-transportation, orders decreased 0.3% m/m, versus forecasts of a 0.2% decline and compared to August’s downwardly-adjusted 0.3% increase. Moreover, orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, decreased 0.5%, compared to projections of a 0.1% dip, and the prior month’s figure was negatively-revised to a 0.6% drop.
The preliminary Markit U.S. Manufacturing PMI Index for October unexpectedly increased to 51.5 from September’s unrevised 51.1 figure, and versus expectations of a dip to 50.9. The preliminary Markit U.S. Services PMI Index showed growth also accelerated slightly for the key U.S. sector this month, rising to 51.0 from September’s 50.9 figure, matching forecasts. A reading above 50 for both indexes denotes expansion.
Weekly initial jobless claims declined by 6,000 to 212,000, versus estimates of 215,000, with the prior week’s figure being revised higher by 4,000 to 218,000. The four-week moving average dipped by 750 to 215,000, while continuing claims slipped by 1,000 to 1,682,000, north of estimates of 1,678,000.
New home sales declined 0.7% m/m in September to an annual rate of 701,000 units, versus forecasts calling for 702,000 units and south of August’s downwardly-revised 706,000 unit pace. The median home price was down 8.8% y/y at $299,400. New home inventory remained at a 5.5 months of supply at the current sales pace. Sales were lower m/m in the Northeast, South and West, but rose in the Midwest. Compared to the last year, sales are solidly higher across all the regions, except in the Midwest, which are down solidly. New home sales are based on contract signings instead of closings.
The October Kansas City Fed Manufacturing Activity Index dipped further into a level depicting contraction (a reading below zero), declining to -3 from September’s unrevised level -2 reading, matching forecasts.
Treasuries were slightly lower, as the yields on the 2-year and 10-year notes, along with the 30-year bond, ticked 1 basis point (bp) higher to 1.58%, 1.77% and 2.26%, respectively. Schwab’s Chief Fixed Income Strategist Kathy Jones offers her latest commentary, The Bond Investors’ Dilemma, noting that we suggest investors temper expectations about returns in the fixed income markets. She adds that while we still expect most bonds to post positive returns in 2020, it is likely to be driven more by the bonds’ coupon payments rather than price gains.
The markets digested the flood of mixed results, as Q3 earnings season kicks into high gear and today’s unchanged monetary policy decision from the European Central Bank, while contending with lingering optimism of the first stage of a U.S.-China trade deal and continued ambiguity regarding the U.K. Brexit even as we got some progress on an approved divorce deal. This comes amid the backdrop of a slowing global economy.
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