S&P 500 Sees First Gain This Week As Tesla Up 22%: Markets Wrap

The S&P 500 index experienced its first rise this week, fueled by notable gains in Tesla Inc., which climbed 22%, marking its most significant rally since May 2013. The increase came after Tesla announced strong earnings and projected as much as 30% growth in car sales for the upcoming year.

Traders reacted positively to a series of corporate earnings reports, searching for indicators of the economic health of the United States, the world’s largest economy. Meanwhile, Treasuries saw a rebound after suffering losses in previous days.

A measurement of the "Magnificent Seven"—the top leading firms in the market—also reached a three-month peak. Among the notable players, United Parcel Service Inc. (UPS) surged by 5.3%, showing a return to growth in both sales and profits. However, the earnings reports from International Business Machines Corp. (IBM) and Honeywell International Inc. didn’t generate much excitement.

Daniel Skelly from Morgan Stanley’s Wealth Management Market Research & Strategy team shared insights on the market's outlook, stating, "Despite the likelihood of increased volatility as we progress through earning reports and head toward the November elections, the market’s long-term outlook appears strong.”

The market response to Thursday's economic data was modest but positive. Indicators showed that new home sales exceeded forecasts, initial jobless claims fell, and business activity continued to grow at a promising rate. Tom Essaye from The Sevens Report remarked that achieving balanced economic data (not too positive or negative) could be advantageous for the recovery of stocks and bonds.

The S&P 500 improved by 0.2%, reopening above the 5,800 benchmark. The Nasdaq 100 saw a 0.8% rise, while the Dow Jones Industrial Average dipped 0.3%, marking its fourth straight day of losses—the longest streak since June. Tapestry Inc., known for its Kate Spade handbags, made headlines after a judge halted a planned acquisition of rival Capri Holdings Ltd.

In the bond markets, US 10-year yields dropped four basis points to 4.20%. A $24 billion auction for five-year Treasury Inflation-Protected Securities (TIPS) achieved the lowest yield of the year, as these inflation-protected bonds outperformed following the Federal Reserve's recent interest rate cuts.

Concerns regarding oversupply influenced oil prices, which declined, overshadowing worries about geopolitical tensions in the Middle East, particularly surrounding Israel's potential actions toward Iran.

Sam Stovall from CFRA highlighted the current market drivers, suggesting they include expectations from the earnings season, the presidential election, and the bond market's outlook on future Federal Reserve policies. He commented on the resilience seen in the economy and job market, indicating that this strength could lead the Fed to approach rate cuts cautiously.

Market forecasts imply there is likely to be two rate cuts of 25 basis points each in 2024. Current pricing by money markets suggests there is an 85% chance that the Fed will lower rates by a quarter-point next month and approximately 135 basis points of easing before the end of 2025.

Despite the overall decline of the equity market for the week, there continue to be numerous bullish signals for the S&P 500. The US stock benchmark has maintained a position comfortably above its 200-day moving average, holding more than 240 consecutive days above this crucial line. Analysis from SentimenTrader indicates that in previous cases when the S&P 500 closed above its 200-day average for this duration, it typically saw a median gain of 7.2% over the following six months, with successes in almost all instances.

Craig Johnson from Piper Sandler cautioned that while short-term pullbacks and profit-taking are to be expected due to uncertainties involving the US elections, geopolitical situations, and ongoing earnings reports, he has maintained an end-of-2024 price target for the S&P 500 of 6,100.

Analysts see potential for US stocks to advance, placing favorable views on sectors like information technology, utilities, financial services, consumer discretionary, and communication services. Chris Senyek from Wolfe Research commented on the current market concentration levels, which he noted are reminiscent of the “Nifty Fifty” era from the 1960s when the top companies accounted for a significant market weight. As history suggests, the market's current trends are likely to remain intact until the next recession or a drop in enthusiasm surrounding artificial intelligence.

Corporate Highlights

• Boeing Co. faced setbacks as factory workers rejected a new labor contract designed to raise wages by 35% over four years.

• American Airlines Group Inc. revised its full-year profit guidance upwards, citing improvements in its operations.

• Southwest Airlines Co. reported third-quarter profits that exceeded Wall Street's expectations by more than double.

• ServiceNow Inc. experienced strong sales and bookings, showing growth in its AI tool offerings.

• Whirlpool Corp., which owns Maytag, announced better-than-expected earnings while reaffirming its sales forecasts.

• Harley-Davidson Inc. reported decreased motorcycle shipments in the latest quarter, leading to a downward revision in its annual forecasts.

• Greenlight Capital's founder David Einhorn expressed optimism about Peloton Interactive Inc. despite the company's recent challenges.

Market Movements

• The S&P 500 rose 0.2% as of the market close.

• The Nasdaq 100 increased by 0.8%.

• The Dow Jones Industrial Average fell by 0.3%.

• The MSCI World Index gained 0.3%.

• The Bloomberg Magnificent 7 Total Return Index grew by 3.2%.

• The Russell 2000 Index also saw a rise of 0.2%.

Currency Markets

• The Bloomberg Dollar Spot Index decreased by 0.2%.

• The euro increased by 0.4% to $1.0829.

• The British pound also rose by 0.4% to $1.2976.

• The Japanese yen gained 0.6% to 151.84 per dollar.

Cryptocurrency Updates

• Bitcoin rose by 2.5% to $68,258.43.

• Ether increased by 1% to $2,537.84.

Bond Market Movements

• The yield on 10-year Treasuries declined by four basis points to 4.20%.

• Germany’s 10-year yield fell four basis points to 2.27%.

• Britain’s 10-year yield rose by four basis points to 4.24%.

Commodity Pricing

• West Texas Intermediate crude oil dropped by 0.4% to $70.51 a barrel.

• Spot gold saw an increase of 0.8%, reaching $2,736.73 an ounce.

S&P, Tesla, market