Tuesday October 19th


Dow futures gain more than 100 points as investors bet strong profits will continue to lift market

U.S. stock index futures gained on Tuesday as major companies continued to report strong third-quarter earnings, easing concerns that persistent Covid cases and rising costs would derail corporate America’s profit recovery. Futures tied to the Dow Jones Industrial Average climbed about 128 points, or 0.4%. S&P 500 futures added 0.4% and Nasdaq 100 futures advanced 0.3%. The Dow and the S&P 500 come into Tuesday both sitting about 1% from record highs. Dow member Travelers saw its shares gain about 2% in the premarket after the insurance company’s quarterly earnings report topped expectations. Johnson & Johnson also beat third-quarter earnings expectations by 25 cents per share. The health care stock ticked up in early morning trading. Fifth Third Bancorp shares ticked up in early morning trading after its profit and revenue beat Wall Street estimates. Procter & Gamble continued the bullish trend with better-than-expected earnings, but its shares dipped around 2% in premarket trading. The consumer products giant said it is raising prices to cover rising commodity and freight costs and warned that inflation may continue. Elsewhere, Walmart shares gained around 2% in the premarket after Goldman Sachs added the big box retailer to its conviction buy list, saying the stock could rally nearly 40%. As of Tuesday morning, 82% of S&P 500 companies that have reported earnings beat expectations, according to FactSet. Taking into account those reports and estimates for those to come, third-quarter profit growth will come in at 30%, according to FactSet. Other major reports after the bell Tuesday include Netflix and United Airlines. While reports have been strong, investors are looking for commentary from corporate America about supply chain issues and inflation. “The financials got earnings season off to another strong start, but let’s be honest, COVID and supply chain issues aren’t going to impact this group. Now it gets very interesting to see what other industries will have to say about the health of the economic recovery,” said Ryan Detrick, chief market strategist at LPL Financial. Netflix could set the tone for technology earnings this season. Three months ago, the streaming giant forecasted paid net subscriber adds of 3.5 million, while analysts expect about 3.84 million, according to StreetAccount. Analysts are also forecasting fourth-quarter subscriber guidance of 8.5 million, which would be the highest outlook since the first quarter of 2019. Shares of Netflix have traded lower on six of its last seven earnings releases. Earnings from United Airlines should give investors a gauge on the travel recovery from the pandemic. Stocks are coming off of a winning week but have been volatile since September. Morgan Stanley’s chief U.S. equity strategist Mike Wilson — who has been calling for a correction in the broader market — told clients on Monday that although fundamentals are deteriorating, the market seems to be resilient to a bigger pullback. “Whether we end up getting this finishing move at the index level this year or not will depend largely on retail participation, the message that 3Q earnings brings from a guidance standpoint, and the path of PMIs into year end,” said Wilson. On Monday, the S&P 500 and Nasdaq Composite notched their fourth day of gains. The S&P 500 rose 0.34%. The Nasdaq was the relative outperformer, gaining 0.84% as Facebook, Amazon, Apple, Netflix and Google-parent Alphabet all closed higher. The Dow Jones Industrial Average lost 36 points, dragged down by a 3% drop in Disney’s stock. Economic data from China weighed on investor sentiment after it reported low GDP and industrial production for September that fell short of expectations. Industrial production in the U.S. also fell for September as supply constraints continued to hinder manufacturing, the Federal Reserve reported Monday. Shares in Asia-Pacific closed higher on Tuesday, with tech stocks in the region jumping following similar gains overnight for their counterparts on Wall Street. In mainland China, the Shanghai composite edged 0.7% higher to close at 3,593.15, while the Shenzhen component rose more than 1% to 14,499.77. Hong Kong’s Hang Seng index climbed 1.43% in the final hour of trade. The Nikkei 225 in Japan gained 0.65% to close at 29,215,52, while the Topix index advanced 0.36% to 2,026.57. South Korea’s Kospi climbed 0.74% to 3,029.04. Oil prices rose on Tuesday as a supply crunch in natural gas, electricity and coal continued across the globe while falling temperatures in China revived concerns over whether the world’s biggest energy consumer can meet domestic demand for heating. The Brent crude benchmark rose 71 cents, or 0.8%, to $84.98 per barrel, after falling 0.6% on Monday. The contract is still up nearly 7% this month. U.S. West Texas Intermediate (WTI) futures gained $1.01, or 1.23%, to $83.45 per barrel, having risen 0.2% in the previous session and nearly 10% this month. Gold snapped a two-session slide to advance 1% on Tuesday as a weaker dollar and lower U.S. Treasury yields supported prices and lifted bullion’s appeal. Spot gold was up 0.9% at $1,780.90 per ounce by 0854 GMT, after hitting a session high of $1,782.74. U.S. gold futures gained nearly 1% to $1,782.90.