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Market Update

Big Tech Blowout, GDP Might Move Dow to Record Territory. Again.

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October 27, 2017

(Friday Market Open) Earnings, earnings, earnings—they’re everywhere and the markets appear to be responding favorably to the strength of many of the reports out this week.

The Dow Jones Industrials’ ($DJI) might make this eight straight weeks of record making. In the early going, the measure was higher as was the S&P 500 (SPX), though it’s unclear if it can end the week on the plus side. The tech-dominated Nasdaq Composite (COMP) was trending to the upside in triple digits after a heavy spate of robust earnings out yesterday and today.

The GDP might also drive the markets higher. The Commerce Department reported that gross domestic product (GDP), the broadest measure of goods and services, climbed 3% for the quarter. That’s ahead of Wall Street’s forecast for a 2.7% gain and came in spite of hurricanes Harvey and Irma, which temporarily knocked out some business activity throughout big swaths of Texas and Florida. Remember that this is an advance estimate of the GDP and we often see revisions.

Hurricane Harvey was blamed for a $0.04-cent bite out of Exxon Mobil’s (XOM) earnings, the oil giant said this morning, but the largest publicly owned company still managed to outpace Wall Street’s expectations with a near 50% jump in profits. That came at a time that oil prices were higher by nearly 15%. Chevron (CVX) also topped expectations this morning.

Yesterday was a big afternoon for technology, when Alphabet (GOOG), Amazon (AMZN), Microsoft (MSFT), and Intel (INTC) opened their third-quarter books after the session settled. The titans of tech turned in strong results and forecasts. In the afterhours, AMZN shares were tipping over the $1,000 mark into record terrain, up nearly 9% and appeared to keep that pace in the early going. GOOG, MSFT and INTC shares were also higher, and could push the entire sector higher today.

Also yesterday, shares of Twitter (TWTR) surged after the short-burst messenger narrowed its quarterly losses and said daily user growth was accelerating and that it was eyeing “a return to revenue growth.” Shares snapped eight straight days of declines to jump higher than 18% at the close.

Where’s the love for the American Girl? The iconic brand led sales declines for Mattel (MAT), dropping 30% on a year-over-year basis, the company reported late yesterday. The toy company fell far short of Wall Street’s projections of a profit and higher revenues by reporting a loss and a nearly 13% fallback in revenues. Shares took a tumble, down more than 27% in the afterhours and again early today.

The dollar bucked the euro yesterday after the European Central Bank extended its quantitative easing program into September, 2018, and possibly beyond, though the bond purchases are expected to be half of what they are now beginning in January. That appeared to put pressure on the euro and pump the US Dollar Index ($DXY), a measure of the dollar against a basket of currencies, to three-month highs. (See chart.)

Treasuries also saw their yields rise, with the 10-year note closing at 2.452% as it looks to inch its way toward the 2.5% resistance level. In the early going, the yield was trending higher at 2.456%.

US dollar chart

FIGURE 1: DOLLAR GETS PUMPED.

The US Dollar Index popped yesterday against the euro futures (shown in purple), which appeared to weaken after the European Central Bank said it would keep its quantitative easing program in place until September 2018 and possibly beyond. Data source: CMEChart source: The thinkorswim® platform from TD AmeritradeFor illustrative purposes only. Past performance does not guarantee future results.

No Home Sweet Home for You: The housing inventory dearth continued last month as a measure of existing homes sales fell flat in September, according to the National Association of Realtors (NAR). The Pending Home Sales Index, which is built on signed pending-home contracts, stood still at 106 even after August’s numbers were revised. The index is now down 3.5% on a year-over-year basis and at its lowest point since January 2015.

“Activity is falling further behind last year's pace because new listings aren't keeping up with what's being sold,” Lawrence Yun, NAR’s chief economist, said in a press release. He said he expects more worry ahead as inventory starts typically fall off in the winter months.

Want Butter with that Cheese? Butter and cheese options contracts might be getting fat. Open interest for cash-settled options and futures on butter and for options on cheese climbed to fresh peaks yesterday, according to Bloomberg. As demand for dairy products grows in tandem with software innovations that make hedging easier, more farmers, big food companies and speculators look to get in the market, the news site said.

“Record open interest for options indicates ‘participants are more savvy’ about hedging risk," Eric Meyer, president of HighGround Dairy, told Bloomberg.

Nothing Scary Here: Is Halloween beginning to look a lot like Christmas? It’s another big-spending holiday that keeps growing, according to the National Retail Federation. Consumer spending is expected to jump 8.3% to a record $9.1 billion as trick-or-treaters and their parents load up on costumes, candy, home decorations and cards (when was the last time you received a Halloween card?). That’s up from $8.4 billion a year ago. Retailers are jumping on this bandwagon as a means of attracting new customers and Party City even stocked up on employees, hiring 25,000 seasonal workers.

Good Trading,

JJ

@TDAJJKinahan                            

economic calendar

FIGURE 2: THIS WEEK'S ECONOMIC CALENDAR

Source: Briefing.com

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