Stocks rose Monday at the start of a packed week of corporate earnings results.
Here’s where the markets settled Monday:
S&P 500 (^GSPC): +0.69%, or 20.51 points
Dow (^DJI): +0.21%, or 55.61 points
Nasdaq (^IXIC): +0.91%, or 73.44 points
10-year Treasury yield (^TNX): +5.3 bps to 1.803%
WTI crude oil prices (CL=F): -0.9% to $53.31 per barrel
Gold (GC=F): -0.57% to $1,485.60 per ounce
The S&P 500 closed within 1% of its all-time closing high of 3,025.86 it achieved back in late July. With more than 100 component companies set to report quarterly earnings this week, hopes are running high that better-than-expected results will help push the blue-chip index past its prior peak.
Investors were broadly bearish heading into this earnings season given factors including the overhang of the trade war, global slowdown and lapping of early 2018’s cut to the corporate tax rate. Most investors anticipated aggregate S&P 500 earnings per share (EPS) would decline by about 4% over last year.
So far, however, results have not been as soft as feared.
As of Monday morning, companies comprising about one-fifth of the S&P 500’s market capitalization had reported third-quarter results, with earnings beating by 4.7% and 77% of companies topping their bottom-line expectations, according to Credit Suisse analyst Jonathan Golub.
That said, these results have topped expectations by a smaller degree compared to beats in the past. The historical average of beats over the past five years sits at 5.4%, according to Golub.
“Q3 earnings season so far is not as strong as the headlines indicate. Yes, more companies are beating but by [smaller] amounts than usual. The problem is margin pressure; revenue surprises are running ahead of historical averages,” Nicholas Colas, co-founder of DataTrek Research, wrote in a note Monday. “Analysts are still cutting Q3/Q4 numbers as a result.”
Companies announcing results this week include consumer names like Procter & Gamble (PG) and McDonald’s (MCD), tech giants Microsoft (MSFT) and Amazon (AMZN) and industrial and aerospace companies United Technologies (UTX), Caterpillar (CAT) and Boeing (BA).
The packed slate of quarterly results comes as investors continue to eye ongoing geopolitical concerns, with headline risks posing a threat to equity indices’ performance even as earnings roll in.
Overseas, the British pound fluctuated below 1.30 per dollar (GBPUSD=X) after House of Commons Speaker John Bercow shot down an attempt to invoke a second parliamentary vote on Prime Minister Boris Johnson’s Brexit agreement. This came after Parliament had voted Saturday to postpone making a final decision on Johnson’s Brexit deal, complicating Johnson’s aim to exit the EU by the October 31 deadline.
Meanwhile, U.S.-China trade deal updates have mostly underlined progress as of late. White House economic adviser Larry Kudlow told Fox Business Monday morning that President Donald Trump could remove a tranche of tariff increases set to take effect December 15 if further talks with China go well.
Rhetoric out of Beijing has been similarly upbeat. China’s Vice Premier Liu He said publicly Saturday that the sides had made “substantial progress in many fields” and had laid the foundation for signing a multi-part agreement.
U.S., UK and German government debt yields rose Monday across their respective curves. Federal Reserve officials remain in a blackout period this week and will not deliver public remarks ahead of their Oct. 29-30 rate-setting meeting. As of Monday afternoon, markets priced in a more than 90% probability of another quarter point cut to benchmark interest rates after the October meeting.
STOCKS: Wall Street gets bullish on Peloton, Halliburton earnings disappoint
About dozen Wall Street firms initiated bullish calls on shares of Peloton (PTON) after its 25-day quiet period following its IPO ended Monday. Shares of the fitness equipment-maker and workout subscription company had begun trading on September 26 on the Nasdaq. The stock initially surged during early trading before reversing course and falling more than 5%.
Analysts at firms including Bank of America, Canaccord Genuity, Stifel, SunTrust, UBS, JMP, Cowen, Evercore ISI, Telsey, Barclays, JPMorgan and KeyBanc each gave Peloton’s stock a buy, outperform or overweight rating. Some of these firms served as underwriters for Peloton’s IPO – however, banks are required to maintain a separation between their research and investment banking divisions.
“We believe Peloton is well positioned to disrupt the fitness industry through its at-home connected fitness subscription platform, which in our view fundamentally improves the fitness experience through convenience and cost,” JPMorgan analyst Doug Anmuth said in a note. “We believe there is significant runway for growth as Peloton transitions from a largely U.S. bike business into a global fitness platform.”
Halliburton (HAL), the biggest global fracking service provider, posted weaker-than-expected third-quarter revenue and called out a “challenging market” in its key North American market. Shares declined around 1.5% during early trading but reversed course after management said during a call with investors that it expected North American work would “uptick” in the first-quarter of 2020.
Revenue from the U.S. and Canada fell 11% over last quarter to $2.9 billion, with the drop “primarily associated with lower activity and pricing in pressure pumping and well construction services in North America land,” Halliburton said. International revenue was about flat compared to the quarter prior at $2.6 billion.
Overall company sales were down 10% year-over-year to $5.55 billion, missing consensus expectations for $5.81 billion, according to Bloomberg data. Adjusted EPS from continuing operations matched expectations at 34 cents.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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