Stock Market News for Oct 19, 2021

Wall Street closed mixed on Monday as expectations for strong third-quarter earnings results were offset partially by weak economic data of the United States and China. The S&P 500 and the Nasdaq Composite ended in green while the Dow finished in red.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) dropped 0.1% to close at 35,258.61. Notably, 9 components of the 30-stock index ended in the green while 20 in red and 1 unchanged. The blue-chip index is just around 1% below its all-time high recorded on Aug 16.

The tech-heavy Nasdaq Composite finished at 15,021.81, gaining 0.8% or 124.47 points due to strong performance by large-cap technology stocks. This marked the tech-laden index’s fourth consecutive days of gain and largest winning streak since Sep 7.

Meanwhile, the S&P 500 increased 0.3% to end at 4,486.49. This marked the broad-market index’s fourth consecutive days of gain and largest winning streak since Aug 25. Seven out of eleven sectors of the benchmark index closed in positive territory and four in red. The Consumer Discretionary Select Sector SPDR (XLY) gained 1.2% while the Utilities Select Sector SPDR (XLU) fell 1%.

The fear-gauge CBOE Volatility Index (VIX) was up 0.1% to 16.31. A total of 9.1 billion shares were traded on Monday, lower than the last 20-session average of 10.3 billion. Decliners outnumbered advancers on the NYSE by a 1.09-to-1 ratio. On Nasdaq, a 1.24-to-1 ratio favored declining issues.

The yield on the benchmark 10-Year U.S. Treasury Note climbed to 1.627% before settling at 1.583% as the Fed’s last FOMC minutes indicated that the central bank may start tapering of the quantitative easing program this year.

Despite this, shares of technology behemoths like Apple Inc. AAPL, Microsoft Corp. MSFT and NVIDIA Corp. NVDA rallied 1.2%, 1% and 1.7%, respectively. NVIDIA sports a Zacks Rank #1 (Strong Buy). You Can see the complete list of today's Zacks #1 Rank stocks here.

Robust Start to Q3 Earnings Season

As of Oct 15, 41 S&P 500 companies reported third-quarter results. Total earnings of these companies are up 40.4% year over year on 13.4% higher revenues with 85.4% beating EPS estimates and 70.7% surpassingrevenue estimates.

Total third-quarter earnings of the market's benchmark — the S&P 500 Index — are projected to jump 29.4% from the same period last year on 14.1% higher revenues, following 95% year-over-year earnings growth on 25.3% higher revenues in the second quarter and 49.3% year-over-year earnings growth on 10.3% higher revenues in first-quarter 2021.

The first two quarters of this year were favorably impacted since the corresponding quarters of last year were affected by the pandemic-led lockdowns and restrictions. Nevertheless, the U.S. economy started reopening partially albeit at a very slow pace since the third quarter of 2020. Notwithstanding favorable comparisons with last year, third-quarter 2021 earnings estimates reflect genuine growth, climbing 20% from the pre-pandemic third-quarter 2019.

Economic Data

The U.S. industrial production declined 1.3% in September compared with the consensus estimate of a break-even. August’s data was revised downward to a decline of 0.1% from a gain of 0.4% reported earlier. September’s data was the worst monthly decline since February. However, nearly half of the decline of industrial production in last month was attributable to the hurricane Ida.

Manufacturing, utilities and mining activities fell 0.7%, 3.6% and 2.3%, respectively, in September. Drop in manufacturing output was mainly due to a 7.2% decline in motor vehicles and parts owing to shortages of semiconductors. Industrial production climbed 4.3% year over year in third-quarter 2021, marking itsfifth consecutive quarter with a gain of 4% or more.

Meanwhile capacity utilization fell to 75.2% compared with the consensus estimate of 76.4%. August’s data was revised downward to 76.2% from 76.4%.

The National Association of Home Builders/Wells Fargo Housing Market Index revealed that the builder confidence in the single-family home construction market rose 4 points to 80 in October. Any reading above 50 is positive.The current sales conditions gained 5 points to 87. Sales expectations in the next six months grew 3 points to 84 and buyer traffic rose 4 points to 65.

The National Bureau of Statistics of China reported that the country’s GDP grew 4.9% in the third quarter from a year ago, missing the consensus estimate of 5.2%. Industrial production rose by 3.1% in September, below the consensus estimate of 4.5%.Fixed asset investment for the first three quarters of the year was up 7.3%, missing the consensus estimate of 7.9%.

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