S&P 500, Nasdaq Log First Decline Since Election Day; Tesla Post-Election Rally Fizzles

The S&P 500 Index Tuesday closed down -0.29%, the Dow Jones Industrials Index closed down -0.86%, and the Nasdaq 100 Index closed down -0.17%.

Stock indexes settled moderately lower on Tuesday as they consolidated the past week’s rally to record highs. Higher bond yields Tuesday fueled some profit-taking pressures in stocks following five straight sessions of gains. Also, long liquidation in stocks ahead of Wednesday's US consumer price report weighed on the overall market.

Stocks have rallied sharply over the past week, with the S&P 500, Dow Jones Industrials, and the Nasdaq 100 posting new record highs on speculation President-elect Trump will boost corporate profits through tax cuts and reduced regulation.

Positive Fed comments on Tuesday were bullish for stocks. Richmond Fed President Barkin said the US economy looks "pretty good," and the Fed is in a position to respond however the economy evolves. Also, Minneapolis Fed President Kashkari said only inflation could derail a Fed rate cut in December, and "if we saw inflation surprises to the upside between now and then, that might give us pause."

The markets are looking ahead to Wednesday’s US consumer price report for October, with Oct CPI expected to climb to +2.6% y/y, up from +2.4% y/y in Sep, and core Oct CPI expected to remain unchanged from Sep at +3.3% y/y. Also, Friday’s report on retail sales will be looked at to see if consumer spending is holding up. Oct retail sales are expected to be up +0.3% m/m, and Oct retail sales ex-autos are also expected to be up +0.3% m/m.

Of the 85% of companies in the S&P 500 that have released Q3 earnings so far, 75% surpassed the estimates, slightly below the 3-year average. According to Bloomberg Intelligence, companies in the S&P 500 have reported an average +8.4% y/y increase in quarterly earnings in Q3, more than double the preseason forecast.

The markets are discounting the chances at 62% for a -25 bp rate cut at the December 17-18 FOMC meeting.

Overseas stock markets Tuesday settled lower. The Euro Stoxx 50 tumbled to a 2-month low and closed down -2.25%. China's Shanghai Composite Index closed down -1.39%. Japan's Nikkei Stock 225 closed down -0.40%.

Interest Rates

December 10-year T-notes (ZNZ24) Tuesday closed down by -15.5 ticks. The 10-year T-note yield rose +13.1 bp to 4.435%. T-notes were under pressure Tuesday from carryover weakness in European government bonds. Also, upbeat comments Tuesday from Richmond Fed President Barkin curbed safe-haven demand for T-notes when he said the US economy looks "pretty good." In addition, concerns about inflationary pressures of future policies from President-elect Trump are weighing on T-notes.

European government bond yields Tuesday moved higher. The 10-year German bund yield rebounded from a 1-1/2 week low of 2.299% and finished up +3.6 bp to 2.362%. The 10-year UK gilt yield rose +7.4 bp to 4.499%.

The German Nov ZEW survey expectations of economic growth unexpectedly fell -3.7 to 7.4 versus expectations of an increase to 13.2.

ECB Governing Council member Rehn said disinflation in the Eurozone is "well on track," and the growth outlook "seems to be weakening," and "that strengthens the case for an ECB rate cut in December."

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 23% for a -50 bp rate cut at the same meeting.

US Stock Movers

Mosaic closed down more than -7% to lead losers in the S&P 500 after reporting Q3 net sales of $2.8 billion, weaker than the consensus of $3.14 billion.

GE Vernova closed down more than -7% after the Financial Times reported that CEO Strazik said the company plans to postpone searching for new offshore turbine orders until market conditions improve.

Home builders retreated Tuesday after the 10-year T-note yield jumped more than +13 bp, which boosts mortgage rates and is negative for housing demand. As a result, PulteGroup , Lennar , DR Horton , and Toll Brothers closed down more than -3%.

Elevance Health closed down more than -2% after the CFO said he sees pressure in Medicaid persisting in 2025 and sees Medicare Advantage margins missing their 2025 targets.

Neurogene closed down more than -43% after a disclosure indicated an emerging serious adverse event in a trial participant for the experimental Rett syndrome drug.

Alnylam Pharmaceuticals closed down more than -3% after Wolfe Research downgraded the stock to underperform from peer perform with a price target of $205.

Knight-Swift Transportation Holdings closed down more than -4% after Citigroup downgraded the stock to sell from neutral with a price target of $56.

Airbnb closed down more than -2% after Phillip Securities downgraded the stock to reduce from neutral with a price target of $120.

Tyson Foods closed up more than +6% to lead gainers in the S&P 500 after reporting Q4 adjusted EPS of 92 cents, stronger than the consensus of 72 cents.

Honeywell International closed up more than +3% to lead gainers in the Dow Jones Industrials and Nasdaq 100 after Elliot Investment Management said it built a $5 billion stake in the company and is calling for a breakup of the company.

Live Nation Entertainment closed up more than +4% after reporting Q3 adjusted operating income of $909.8 million, stronger than the consensus of $856.6 million.

Nvidia closed up more than +2% after Redburn initiated coverage on the stock with a buy recommendation and a price target of $178.

Shopify closed up more than +21% after reporting Q3 revenue of $2.16 billion, better than the consensus of $2.12 billion.

Twilio closed up more than +2% after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $120.

Molson Coors Beverage closed up more than +2% after JPMorgan Chase said the latest data showed improving trends for the company as the latest 4-week trend to November 2 saw dollar takeaway down -1.9%, an improvement of 200 bp over the prior 4-week period.

Earnings Reports (11/13/2024)

Cisco Systems Inc (CSCO), Loar Holdings Inc (LOAR), NU Holdings Ltd/Cayman Islands (NU), Tetra Tech Inc (TTEK).

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policyhere.

While the final House votes are still being tallied, the latest projections indicate that Republicans are set to take control of the lower chamber of Congress alongside the Senate, clearing the path a full GOP sweep of the executive and legislative branches. Investors have been quick to cheer an expected pro-business agenda from President-elect Trump, which is broadly anticipated to feature investments in domestic manufacturing and infrastructure, widespread deregulation, and fresh tax incentives. Additionally, shifts in environmental policies could affect the renewable energy and waste management industries.

Against this backdrop, analysts at Oppenheimer have highlighted three stocks that could benefit from anticipated policy changes under the incoming “Red Wave” in Washington, D.C.: Caterpillar , a leader in heavy equipment manufacturing expected to benefit from infrastructure spending and reshoring trends; Tesla , the domestic electric vehicle (EV) leader whose CEO Elon Musk is a close ally of Trump's; and Republic Services , a top player in waste management and recycling that could see a boost for its landfill biogas initiatives. Here's a closer look at all three.

#1. Tesla

Tesla has already experienced a meteoric rise following Donald Trump's election win. The stock has surged 32% in the past week, reaching a 52-week high above $358 in the process and reclaiming a $1 trillion market cap. TSLA is now up 33.8% on a YTD basis after spending most of 2024 in the red, although the shares remain down about 15% from their 2021 highs.

US benchmark equity indexes retreated from Monday's all-time high closing levels as markets parsed comments by two Federal Reserve officials and awaited official consumer inflation data for October.

The Dow Jones Industrial Average fell 0.9% Tuesday to close at 43,911, while the S&P 500 dropped 0.3% to 5,984. The Nasdaq Composite lost 0.1% to 19,281.4. Materials saw the steepest decline among sectors, while communication services, technology, and consumer staples posted gains.

The US economy is in "a good place," while interest rates are off their recent peak and historic lows, Richmond Fed President Tom Barkin said. This puts policymakers in a position to "respond appropriately" irrespective of how the economy evolves, he added.

Separately, Minneapolis Fed President Neel Kashkari said the US monetary policy is "modestly restrictive," with short-term borrowing costs continuing to cool inflation and slow the economy, though not by much, Reuters reported.

On Thursday, the central bank's Federal Open Market Committee reduced its benchmark lending rate by 25 basis points, following a 50-basis-point cut in September.

The US 10-year yield jumped 12 basis points to 4.43% Tuesday, while the two-year rate advanced 8.6 basis points to 4.34%.

In economic news, US consumers' inflation expectations cooled in October, while labor market concerns eased, according to a survey by the New York Fed.

Official data are expected to show Wednesday that US consumer inflation rose 0.2% sequentially and 2.6% annually last month, according to a Bloomberg-compiled consensus.

Official producer prices data for October are scheduled to be released Thursday.

Small business optimism in the US rose more than projected in October, while the uncertainty index hit a record high, though that's likely to improve now that the presidential election is over, according to the National Federation of Independent Business' latest survey.

Donald Trump won the election last week, marking his return to the White House.

In company news, Mosaic shares dropped 7.7%, the steepest decline on the S&P 500, after its third-quarter financial results fell more than expected.

Amgen was the worst performer on the Dow and the Nasdaq, and among the worst on the S&P 500, down 7.1%.

Tyson Foods surpassed top- and bottom-line expectations for its fiscal fourth quarter and issued guidance implying a slight cooldown in sales in the new year amid ongoing uncertainties with its beef business. The company's shares rose 6.6%, the top gainer on the S&P 500.

Live Nation Entertainment shares gained 4.7%, among the best performers on the S&P 500. The company reported mixed third-quarter results late Monday and said it's seeing strong demand in the current quarter and into 2025 for its Ticketmaster sales segment.

West Texas Intermediate crude oil was little changed at $68.01 a barrel Tuesday. The Organization of the Petroleum Exporting Countries reduced its 2024 and 2025 global oil demand projections for the fourth straight month while raising its world economic growth forecasts.

Gold fell 0.4% to $2,607 per troy ounce, while silver rose 1% to $30.92 per ounce.

Tuesday, November 12, 2024

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Netflix, Inc. (NFLX), Salesforce, Inc. (CRM) and Cisco Systems, Inc. (CSCO), as well as a micro-cap stock, BK Technologies Corp. (BKTI). These research reports have been hand-picked from roughly 70 reports published by our analyst team today.

You can see all of today’s research reports here >>>

Netflix’s shares have outperformed the Zacks Broadcast Radio and Television industry over the past two years (+169.1% vs. +77.1%). The Zacks analyst believes that the planned launch of an in-house ad tech platform next year signals the company's commitment to maximize its revenue stream, with ad revenues expected to roughly double year-over-year in 2025. A robust, localized and foreign-language content lineup and healthy customer engagement levels have helped.

However, stiff competition in the streaming space from the likes of Apple, Amazon Prime Video and Disney+ remains a headwind.

(You can read the full research report on Netflix here >>>)

Salesforce’s shares have outperformed the Zacks Computer – Software industry over the past year (+58.7% vs. +21.3%). The Zacks analyst believes that the company’s sustained focus on aligning products with customer needs is driving growth. Continued deal wins in the international market are another growth driver. Salesforce’s strategy of continuous expansion of generative AI offerings are also helping it to tap the growing opportunities in the space.

Yet, stiff competition and unfavorable currency fluctuations are concerns. Softening IT spending amid ongoing macroeconomic uncertainties might hurt its growth prospects.

(You can read the full research report on Salesforce here >>>)

Shares of Cisco have outperformed the Zacks Computer - Networking industry over the last six months (+20.4% vs. +19.2%). Per the Zacks analyst, the launch of AI-powered Hypershield, which combines security and networking, has strengthened the company’s security portfolio. Also, its business model has evolved with subscription revenues accounting for more than half of total revenues.

Yet, Cisco has been suffering from sluggish networking sales as well as stiff competition. Its prospects are further challenged in the AI-driven networking space due to stiffening competition aggravated by Hewlett Packard’s deal to acquire Juniper.

(You can read the full research report on Cisco here >>>)

BK Technologies’ shares have outperformed the Zack Wireless Equipment industry over the past year (+119.5% vs. +52.3%). The Zacks analyst believes that the growing demand for BKR 9000 and BKR 5000 radios have supported revenue growth. Also, a large order backlog and focus on innovation, such as the patented InteropONE solution, strengthens BK's market position.

However, reliance on government contracts, supply-chain risks and limited product diversification pose potential challenges.

(You can read the full research report on BK Technologies here >>>)

Other noteworthy reports we are featuring today include Tesla, Inc. (TSLA), Novartis AG (NVS) and TotalEnergies SE (TTE).

Mark Vickery

Senior Editor

Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>

Today's Must Read

Salesforce (CRM) Rides on Portfolio Strength and Buyouts

Netflix (NFLX) Rides on Subscriber Growth, Original Content

Cisco (CSCO) Benefits From Strong Security Products Adoption

Featured Reports

Air Travel Demand Aids American Airlines (AAL) Amid Debt Woe

The Zacks analyst is impressed by the rosy air travel demand scenario. However, the company's high debt load is a concern.

Kisqali, Pluvicto Drive Novartis (NVS) Amid Competition

Per the Zacks analyst, drugs like Entresto, Kesimpta, Pluvicto, Kisqali and Leqvio continue to fuel Novartis' growth. However, generic competition and pipeline setbacks remain concerns.

BP to Boost Production with Strategic Upstream Projects

The Zacks analyst believes BP's new projects, including Seagull and Coconut, enhance its production capacity, supporting its growth in global energy supply and strengthening its upstream portfolio.

Expanding LNG & Clean Energy Assets Aid TotalEnergies (TTE)

Per the Zacks analyst TotalEnergies' presence in entire LNG value chain and expansion of clean energy generation through joint venture and acquisition will boost its performance.

Telefonica (TEF) Rides on Robust 5G Coverage Amid Forex Woes

Per the Zacks analyst, Telefonica's extensive 5G footprint across Spain, Germany and Brazil is solidifying its position. However, global macroeconomic uncertainty and forex volatility are concerning.

Strong Organic Growth and Partnerships Aid Affirm Holdings (AFRM)

Per the Zacks analyst, higher card network revenues and growing servicing income are driving Affirm's revenues. Partnerships and product innovations also bode well.

Strategic Initiatives Aid Owens Corning (OC), High Costs Ail

Per the Zacks analyst, Owens Corning benefits from strategic initiatives and structural improvements. However, high costs and challenges in discretionary projects are concerns.

New Upgrades

Tesla (TSLA) to Ride on Trump's Win & Economies of Scale

Despite potential rebate cuts under a Trump presidency, Tesla is well-positioned to thrive without subsidies, thanks to its cost efficiency and unmatched scale, per the Zacks analyst.

Deckers' (DECK) HOKA Brand Likely to Fuel Top Line

Per Zacks analyst, HOKA, Deckers' flagship brand, has seen notable growth with market penetration expanding, especially internationally. DECK expects HOKA sales to rise 24% for fiscal 2025.

NuVasive Synergy, New Launches Aid Globus Medical (GMED)

Globus Medical's expanding Trauma sales following NuVasive's acquisition is a major positive. Per the Zacks analyst, the company's focus on differentiated technology-based innovation is a key driver.

New Downgrades

Aging Infrastructure & Seasonality Ail MDU Resources (MDU)

Per the Zacks analyst, MDU Resources' aging natural gas pipelines and transmission facilities may affect operations. Seasonality of business operations may lower demand and adversely impact its result

Elevated Expenses, Poor Asset Quality Hurt F.N.B. Corp (FNB)

Per the Zacks analyst, deteriorating asset quality because of a tough operating backdrop is a major headwind for F.N.B. Corp. Rising costs and high debt levels are other near-term concerns.

Rising Expenses & Weak Asset Quality to Hurt WaFd (WAFD)

Per the Zacks analyst, mounting non-interest expenses, significant exposure to commercial loans, and deteriorating asset quality will likely hurt WaFd's financials.

Zacks Investment Research