Weekly Wrap

The stock market closed out another winning week with the S&P 500 and Dow Jones Industrial Average at fresh record highs. The Russell 2000 (1.9%) pacing index gains, the S&P 500 settled 0.9% higher, the Nasdaq Composite jumped 0.8%, and the Dow Jones Industrial Average rose 1.0%. 

Gains were relatively broad based, driven by ongoing momentum as stocks continue to hit new record highs. The equal-weighted S&P 500 settled 1.1% higher than last Friday.  

Semiconductor stocks were a pocket of weakness in a mostly upbeat tape. The PHLX Semiconductor Index (SOX) dropped 2.4% this week in response to a Bloomberg report that the Biden administration is looking at curbing sales of advanced AI chips to certain countries, with a focus on Persian Gulf countries, and in response to ASML's (ASML) Q3 results.

The semiconductor equipment maker's results were released early and disappointed investors due to below-consensus EPS, revenues, and net bookings. The company also issued weaker-than-expected FY25 revenue guidance saying, "While there continue to be strong developments and upside potential in AI, other market segments are taking longer to recover."

Taiwan Semiconductor Manufacturing Company (TSM) reported pleasing Q3 results, along with better-than-expected Q4 guidance, which stirred some buy-the-dip interest in the space by the end of the week. 

A lot of the earnings news this week was well received, contributing to the overall positive bias. Dow component UnitedHealth (UNH) was an exception, registering a sharp decline after reporting its third quarter earnings, which featured an increase in its medical care ratio, and issuing some tepid FY25 earnings guidance.

This price action impacted the S&P 500 health care sector's performance. It was one of two sectors to close lower this week. The only other sector to log a decline was energy (-2.6%), which was reacting to a drop in oil prices. WTI crude oil futures settled Friday at $68.62/bbl. 

The financial sector was a top performer as investors digested a slate of earnings news from the space. Morgan Stanley (MS) and Goldman Sachs (GS) were some of the standouts in that respect.

Market participants were also weighing the notion that the Fed won't be as aggressive as previously thought after more solid economic data. This week's releases included September retail sales, which were stronger than expected, and initial jobless claims, which were not as bad as feared.

Monday:

Monday's session featured a broad rally on below-average volume at the NYSE. The S&P 500 (+0.8%) and Dow Jones Industrial Average (+0.5%) extended further into record territory and the Nasdaq Composite (+0.9%) closed about 170 points below its all-time high.

There wasn't a lot of conviction on either side of the tape in the early going. Mega caps and chipmakers were showing strength initially, which drew in buying interest in other stocks.

Oil prices were pressured by demand concerns after China's Ministry of Finance underwhelmed with a lack of details at the press briefing on economic stimulus.

There was no US economic data of note on Monday.

Tuesday: 

The S&P 500 (-0.8%), Nasdaq Composite (-1.0%), and Dow Jones Industrial Average (-0.8%) settled with solid losses while the Russell 2000 eked out a 0.1% gain.

Index-level losses were impacted by weakness in semiconductor-related names. Initial weakness in the semiconductor space followed a Bloomberg report that the Biden administration is looking at curbing sales of advanced AI chips to certain countries, with a focus on Persian Gulf countries.

Selling intensified in the space in response to ASML's (ASML) Q3 results.

The semiconductor equipment maker's results were released early and disappointed investors due to below-consensus EPS, revenues, and net bookings. The company also issued weaker-than-expected FY25 revenue guidance saying, "While there continue to be strong developments and upside potential in AI, other market segments are taking longer to recover."

Market participants were also reacting to earnings news from influential names. UnitedHealth (UNH), the largest component in the price-weighted DJIA, weighed down other health care stocks. The S&P 500 health care sector declined 1.2%.

Goldman Sachs (GS), Bank of America (BAC), Citigroup (C) are also among the names that reported earnings since yesterday's close. The financial sector settled 0.3% higher despite mixed responses to the quarterly results.

Reviewing Tuesday's economic data:

• October NY Fed Empire State Manufacturing -11.9 (Briefing.com consensus 2.0); Prior 11.5

Wednesday:

The stock market had a solid showing. The Russell 2000 continued its recent outperformance, jumping 1.6%, bringing its weekly gain to 2.5%. The S&P 500 (+0.5%), Nasdaq Composite (+0.3%), and Dow Jones Industrial Average (+0.8%) settled with solid gains near their highs of the day.

The influential financial sector (+1.2%) played a leadership role after earnings news from the space received positive responses. Morgan Stanley (MS), First Horizon (FHN), and Synchrony Financial (SYF) are among the standouts in that respect.

Rebound action in some semiconductor-related names after yesterday's sharp selling also contributed to the upside bias today, along with buy-the-dip interest in other areas of the market.

Reviewing Wednesday's economic data:

• Weekly MBA Mortgage Applications Index -17.0%; Prior -5.1%
• September Import Prices -0.4%; Prior was revised to -0.2% from 0.8%
• September Import Prices ex-oil 0.1%; Prior was revised to 0.1% from -0.1%
• September Export Prices -0.7%; Prior was revised to -0.9% from -0.7%
• September Export Prices ex-ag. -0.9%; Prior was revised to -0.7% from -0.6%

Thursday:

The S&P 500 (-0.02%) and Nasdaq Composite (+0.04%) settled near their prior closing levels, the Dow Jones Industrial Average closed 0.4% higher, and the Russell 2000 (-0.3%) declined slightly after leading index gains this week.

There was a negative bias under the index surface related to rising market rates and the notion that the Fed won't be as aggressive as previously thought after more solid economic data.

Thursday morning's data included September retail sales, which were stronger than expected, and initial jobless claims, which were not as bad as feared.

Downside moves in the equity market were somewhat limited due in part to strength in semiconductor stocks. The PHLX Semiconductor Index (SOX) settled 1.0% higher after Taiwan Semiconductor Manufacturing Company (TSM) reported pleasing Q3 results, along with better-than-expected Q4 guidance.

Reviewing Thursday's economic data:

• Weekly Initial Claims 241K (Briefing.com consensus 270K); Prior was revised to 260K from 258K, Weekly Continuing Claims 1.867 mln; Prior was revised to 1.858 mln from 1.861 mln
  • The key takeaway from the report is that it is muddled by the effects of the hurricanes, yet it is being greeted with a sense of pleasant surprise that initial jobless claims were much better than feared.
• September Retail Sales 0.4% (Briefing.com consensus 0.2%); Prior 0.1%, September Retail Sales ex-auto 0.5% (Briefing.com consensus 0.1%); Prior was revised to 0.2% from 0.1
  • The key takeaway from the report is that consumer spending on goods accelerated in September with notable increases seen in many discretionary categories like miscellaneous store retailers (+4.0%), clothing and clothing accessories (+1.5%), and food services and drinking places (+1.0%). This is a "no landing" type of report.
• October Philadelphia Fed Index 10.3 (Briefing.com consensus 4.0); Prior 1.7
• September Industrial Production -0.3% (Briefing.com consensus -0.1%); Prior was revised to 0.3% from 0.8%, September Capacity Utilization 77.5% (Briefing.com consensus 77.9%); Prior was revised to 77.8% from 78.0%
  • The key takeaway from the report is that industrial production in September was pressured by two extraordinary factors, which implies a rebound in growth should follow as those extraordinary factors find correction. The Boeing strike held back growth by an estimated 0.3% and the effects of Hurricanes Helene and Milton subtracted an estimated 0.3%.
• August Business Inventories 0.3% (Briefing.com consensus 0.3%); Prior was revised to 0.3% from 0.4%
• October NAHB Natural Gas Inventories 43 (Briefing.com consensus 43); Prior 41

Friday: 

The S&P 500 (+0.4%) and Dow Jones Industrial Average (+0.1%) set fresh record highs on this winning week. The Nasdaq Composite (+0.6%) jumped more than 100 points while the Russell 2000 slid 0.2% after outperforming through the week.

A big gain in Netflix (NFLX) following better-than-expected earnings results and guidance provided some support to the broader market. This price action also boosted the S&P 500 communication services sector (+0.9%), which logged the largest gain.

The next best performing sector was real estate (+0.7%), followed by utilities (+0.6%) and information technology (+0.5%). The financial sector settled flat, weighed down by an earnings-related loss in Dow component American Express (AXP). Shares declined despite better-than-expected Q3 EPS results and above-consensus guidance.

The upside bias in equities is also related to a drop in market rates following this morning's data.

Reviewing Friday's economic data:

• September Housing Starts 1.354 mln (Briefing.com consensus 1.350 mln); Prior was revised to 1.361 mln from 1.356 mln, September Building Permits 1.428 mln (Briefing.com consensus 1.455 mln); Prior was revised to 1.470 mln from 1.475 mln
  • The key takeaway from the report is that the change single-unit starts and permits varied across regions after showing across-the-board growth in August.