The equity futures market is pointing to a lower open for stocks, but don’t blame the earnings news. Bank of America (BAC), Goldman Sachs (GS), Johnson & Johnson (JNJ), and Lockheed Martin (LMT) surpassed their respective consensus earnings estimates.
The good earnings news may be deemed good at another time, but it seems to be just hanging out there at the moment as corporate news that is being overshadowed by a continued rise in Treasury yields, lingering uncertainty about the evolution of the Israel-Hamas War, and political uncertainty here at home as the House tries to fill a vacant Speaker chair.
Rep. Jim Jordan (R-OH) is the GOP’s new nominee coming out of conference, but it remains unclear if he will get the 217 votes needed to be elected Speaker. A full House vote will be held at 12:00 p.m. ET today.
Participants will have to wait and see how the vote unfolds, but they don’t have to wait any more to see how the September Retail Sales Report unfolded. It was out at 8:30 a.m. ET, and it was stronger than expected.
Total retail sales increased 0.7% month-over-month in September (Briefing.com consensus 0.3%) following an upwardly revised 0.8% increase (from 0.6%) in August. Excluding autos, retail sales jumped 0.6% month-over-month (Briefing.com consensus 0.2%) following an upwardly revised 0.9% increase (from 0.6%) in August. The strength wasn’t just because of higher gasoline prices either. Excluding gasoline stations, retail sales were up 0.7%.
The key takeaway from the report is that it doesn’t reflect a consumer who is shying away from spending. That understanding should translate favorably into Q3 GDP forecasts, and less favorably in forecasts pertaining to the Fed’s policy view.
Treasury yields, which were already higher ahead of the Retail Sales report, continued their climb after its release. The 2-yr note yield is up six basis points to 5.15% and the 10-yr note yield is up 11 basis points to 4.82%. The September Industrial Production and Capacity Utilization Report will be released at 9:15 a.m. ET.
The move in the Treasury market has applied some added weight to the equity futures market.
Currently, the S&P 500 futures are down 23 points and are trading 0.6% below fair value, the Nasdaq 100 futures are down 118 points and are trading 0.8% below fair value, and the Dow Jones Industrial Average futures are down 98 points and are trading 0.3% below fair value.
The broader market, therefore, is on track for a lower open, but of course there will be some individual standouts like Bank of America (BAC), which is up 1.4% after its earnings report, and Wyndham Hotels & Resorts (WH), which is up 12.4% after receiving a hostile takeover offer from Choice Hotels International (CHH) for $90.00 per share in cash and stock.
All moves of course are unfolding against a tense, and highly uncertain, geopolitical backdrop. Israel has yet to launch its ground invasion on Gaza, but President Biden will be traveling to Israel on Wednesday to show U.S. support for Israel and to consult with regional leaders on next steps.
To be sure, each step is a delicate one in the attempt to keep a wider conflict from happening.
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Originally Posted October 17, 2023 – Rates tracking higher, stocks tracking lower
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