Data from China showed the world’s largest economy grew at the slowest pace in nearly three decades, and the weaker than expected print threatened to take the fizz out of stocks. But U.S. shares seem to be holding up well as a strong start to earnings season continued with Coca-Cola (KO) shares gaining after the soft drink maker reported revenue that topped expectations.
Coca-Cola revenue points to resilient U.S., international consumer
Schlumberger beats expectations on top, bottom lines
China’s economy grew at 6% in Q3
(Friday Market Open) Data from China showed the world’s largest economy grew at the slowest pace in nearly three decades, and the weaker-than-expected print threatened to take the fizz out of stocks. But U.S. shares seem to be holding up well as a strong start to earnings season continued with Coca-Cola (KO) shares gaining after the soft drink maker reported revenue that topped expectations.
The KO results point to a resilience among both domestic and international consumers that is encouraging after recent data showed disappointing overall retail sales in the U.S.
Meanwhile, Schlumberger’s (SLB) shares were also higher after the oilfield services company reported earnings and revenue that came in ahead of forecasts. Increased demand for the company’s products from international drilling activity helped SLB despite oil prices that have been relatively subdued.
While it’s still early in the earnings season, most of the S&P 500 Index (SPX) companies that have reported have beaten expectations, giving investors something solid to hang their hat on after plenty of back and forth in the headlines about the trade situation.
Yesterday, despite some lackluster economic data, U.S. equities finished higher as a raft of better-than-forecast earnings reports added to optimism from news of a draft deal between the United Kingdom and European Union on Britain’s exit from the bloc.
The market is now looking at a tentative Brexit deal and the prospect of a partial trade deal between China and the U.S. With deals in the works on two of the biggest issues facing Wall Street, it might be a good time to remember that ink really hasn’t been put to paper yet and nothing is official.
On the Brexit front, the deal faces opposition from key lawmakers representing Northern Ireland. Meanwhile, President Trump has said he likely won’t sign any trade deal until next month.
Since the UK parliament is expected to have an emergency session on Saturday, it seems likely that we’ll know more about the Brexit situation sooner than we might get something concrete on the trade issue.
Britain is scheduled to leave the European Union on Oct. 31 whether Britain’s parliament ends up passing the draft deal or not. A divorce without a deal could end up being messy for the European economy, which has already been struggling. If that happens, investors have been worried that the fallout could further damage the already flagging global economy even as growth in the U.S. seems to be softening.
On that front, some of the domestic economic data out Thursday was less than thrilling.
September housing starts came in weaker than expected, at a seasonally adjusted annual rate of 1.256 million units. That was below a Briefing.com consensus of 1.306 million. But building permits for the month were better than expected, posting 1.387 million units compared to a consensus expectation of 1.350 million. Still, although permits fell less than expected, they still showed a 2.7% decline from an upwardly revised 1.425 million in August.
Meanwhile, September industrial production fell by more than expected and the Philly Fed manufacturing index for October came up short of expectations.
On the bright side, it seems like the country still has a strong jobs market. Data Thursday showed that continuing claims for unemployment for the week ending Oct. 5 dropped by 10,000 while initial claims for the week ended Oct. 12 rose less than expected.
While the data was mixed, earnings seem to have been more encouraging.
Netflix (NFLX) continued the drumbeat of earnings beats. Its shares rose after the streaming company announced it added more international subscribers than expected and its domestic subscriber growth rebounded, even though it came in under forecast.
Morgan Stanley (MS) became beat earnings estimates amid solid results in its trading business. That follows encouraging results from JP Morgan Chase (JPM), Citigroup (C), Wells Fargo (WFC), and Bank of America (BAC).
Mark Your Calendar: Next week’s economic calendar looks to be relatively light. But just because there isn’t a big number of economic reports, doesn’t mean there isn’t anything worth paying attention to. On Tuesday, we’re scheduled to see existing home sales data for September, and on Thursday we’ll get a peek at new homes sales for the month. Because the housing market is such a big deal for the economy, those are arguably the week’s reports with the highest impact potential for the market. But also consider tuning in for September durable goods orders and the final University of Michigan Consumer Sentiment Index for October.
Earnings Season Heats Up: While the economic calendar is relatively light next week, earnings season will be ramping up. As we’ve said before, earnings drive the market over the long term. And while the raw top- and bottom-line numbers are important, it can also be really good for investors to tune in to what executives have to say on their earnings calls. That can be a good way to glean insight not only into what’s happening with the companies but also with the wider market and economy. Take Boeing (BA) and Caterpillar (CAT), which report next week, for examples. While each has its own specific stuff going on, they’re also proxies for how well the trade situation between China and the U.S is going. Meanwhile, when PulteGroup (PHM) reports on Tuesday, we might get some insight into the housing market that goes deeper than what the new and existing home sales data shows us. Meanwhile, Amazon (AMZN) is scheduled to report Thursday and could provide insight into how well the U.S. consumer is doing. That could be particularly interesting after the recent retail sales report.
Fed Watch: Looking further ahead, it seems like the news flow on the last two days of this month could give market participants plenty to chew on. Brexit is scheduled for Oct. 31, whether a deal is in place or not. And the day before, the Federal Reserve is scheduled to announce an interest rate decision. By that time, if Britain and the EU don’t have a final deal in place and the U.S.-China trade situation isn’t more clear, it’s arguable that the Fed’s rate decision will come even more in focus for investors and traders hoping for more dovish action by the central bank to prop up the economy and market. Although the probability of a rate cut remained high late Thursday, according to the futures market, a rate cut is far from certain as some Fed members appear to be thinking that they should hold off on more easing until we see the effects of the last two rate cuts. But a contraction in U.S. manufacturing and the recent poor reading on retail sales could favor a dovish decision.
Check out all of our upcoming Webcasts or watch any of our hundreds of archived videos, covering everything from market commentary to portfolio planning basics to trading strategies for active investors. You can also deepen your investing know-how with our free online immersive courses or by attending one of our live events. No matter your experience level, there’s something for everybody.
Looking to stay on top of the markets? Check out the TD Ameritrade Network, live programming which brings you market news and helps you hone your trading knowledge. And for the day’s hottest happenings, delivered right to your inbox, you can now subscribe to the daily Market Minute newsletter here.
TD Ameritrade Network is brought to you by TD Ameritrade Media Productions Company. TD Ameritrade Media Productions Company and TD Ameritrade, Inc. are separate but affiliated subsidiaries of TD Ameritrade Holding Corporation. TD Ameritrade Media Productions Company is not a financial adviser, registered investment advisor, or broker-dealer.
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
TD Ameritrade and all third parties mentioned are separate and unaffiliated companies, and are not responsible for each other’s policies or services.
Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2020 TD Ameritrade.