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U.S. stocks are on track to post a six-straight week of gains for the first time since late 2017, showing some resiliency in the face of a mixed retail sales report, another drop in industrial production, and an unexpected deceleration in regional manufacturing growth. Trade uncertainty, which had resurfaced and put a lid on the week's market action, is waning a bit after White House advisor Larry Kudlow offered upbeat comments regarding progress toward a "phase one" U.S.-China trade deal. Applied Materials is rallying after delivering another dose of upbeat results from the semiconductor sector and RH is getting a boost from the disclosed stake in the company by billionaire investor Warren Buffett's Berkshire Hathaway. Treasury yields are mixed and crude oil prices are higher, while the U.S. dollar and gold are lower. Asia finished mostly higher and Europe is trading to the upside.
At 10:53 a.m. ET, the Dow Jones Industrial Average and the S&P 500 Index are rising 0.4%, while the Nasdaq Composite is gaining 0.5%. WTI crude oil is advancing $0.38 to $57.15 per barrel, Brent crude oil is trading $0.34 higher at $62.62 per barrel, and wholesale gasoline is up $0.01 to $1.63 per gallon. The Bloomberg gold spot price is decreasing $2.61 at $1,468.79 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is declining 0.2% at 97.98.
Applied Materials Inc. (AMAT $63) reported fiscal Q4 earnings-per-share (EPS) of $0.75, or $0.80 ex-items, versus the $0.76 FactSet estimate, as revenues were roughly flat year-over-year (y/y) at $3.8 billion, north of the forecasted $3.7 billion. The chip equipment maker said its results reflect a healthy uptick in demand for semiconductor equipment. AMAT issued Q1 guidance that was above the Street's forecasts. Shares are rallying.
Nvidia Corporation (NVDA $204) posted Q3 EPS of $1.45, or $1.78 ex-items, compared to the expected $1.58, with revenues declining 5.0% y/y to $3.0 billion, above the estimated $2.9 billion. The chip company noted that its gaming business and demand from hyperscale customers powered its Q3 results. NVDA issued Q4 revenue guidance that was below forecasts but its gross margin outlook was well above forecasts. Shares are seeing some pressure.
Retail sales mixed, industrial production falls, regional manufacturing growth unexpectedly slows
Advance retail sales (chart) for October rose 0.3% month-over-month (m/m), versus the Bloomberg forecast of a 0.2% increase, and September's 0.3% decline was unrevised. Last month's sales ex-autos gained 0.2% m/m, compared to expectations of a 0.4% gain and September's unrevised 0.1% dip. Sales ex-autos and gas ticked 0.1% higher m/m, compared to estimates of a 0.3% gain, and September's flat reading was adjusted to a 0.1% dip. The control group, a figure used to calculate GDP, was up 0.3%, matching projections, and compared to September's downwardly-adjusted 0.1% decline. Sales of furniture, electronics and appliances, building materials, clothing, and sporting goods all declined, but motor vehicles sales rose and sales at nonstore retailers—which include online shopping—were up solidly and came in 14.3% higher compared to the same period a year ago.
The Federal Reserve's industrial production (chart) fell 0.8% month-over-month (m/m) in October, doubling estimates of a 0.4% decrease, and September's favorably-adjusted 0.3% decline. This was the third monthly decline out of four as utilities production fell solidly, while manufacturing and mining output also dropped, with the former continuing to be negatively affected by a large strike in the automotive industry. Capacity utilization decreased to 76.7% from the prior month's unrevised 77.5% rate, and versus the expected 77.0%. Capacity utilization is 3.1 percentage points below its long-run average.
The Import Price Index (chart) declined 0.5% m/m for October, versus projections of a 0.2% decrease, and following September's downwardly-revised 0.1% gain. Compared to last year, prices fell 3.0%, compared to forecasts of a 2.2% drop and September's negatively-revised 2.1% decrease.
The Empire Manufacturing Index, a measure of activity in the New York region, declined to a level of 2.9 during November from the unrevised 4.0 posted in October, and below the 6.0 forecasted, with a reading above zero denoting expansion in activity.
Business inventories (chart) were flat m/m in September, below forecasts of a 0.1% gain, and versus August's downwardly-adjusted 0.1% dip.
Amid the mixed economic data, Schwab’s Chief Investment Strategist Liz Ann Sonders discusses in her latest article, Split Personality: U.S. Economy's Bifurcation Persists, that the bifurcation between weak manufacturing/capex and stronger services/consumption is seen in the stark differential between CEO and consumer confidence, while noting that profitability and employment data continues to be key to watch for any signs of the bifurcation breaking down.
Treasuries are mixed after trimming a recent drop this week, with the yield on the 2-year note ticking 1 basis point (bp) higher to 1.60%, while the yield on the 10-year note is flat at 1.82% and the 30-year bond rate is dipping 1 bp to 2.29%. For a look at fixed income investing, check out Schwab's Chief Fixed Income Strategist Kathy Jones' commentary, The Bond Investors' Dilemma.
Europe mostly higher as trade remains in focus
European equities are mostly higher in late-day action, with the markets continuing to eye U.S.-China trade developments, with White House advisor Larry Kudlow offering some upbeat comments regarding the progress as the two sides are expected to hold phone discussions today. Resurfaced uncertainty regarding a "phase one" deal has been a source of dampened market sentiment this week. In economic news, the Eurozone trade surplus narrowed more than expected in September and the region's consumer price inflation for October was revised lower. The euro and British pound are higher versus the U.S. dollar, while bond yields in the region are mixed. Economic data has been mixed and Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, delivers his latest article, Will The Crash in Autos Drive The End Of This Cycle?, discussing the question of how the last global economic cycle ended with a housing bust; will the bust in auto sales end this cycle? Jeff notes that this auto-led downturn may be less damaging to the global economy than the housing bust was 10 years ago, but automobile manufacturing still accounts for a sizable amount of production, debt, and jobs.
The U.K. FTSE 100 Index is dipping 0.1%, while Germany's DAX Index is rising 0.2%, France's CAC-40 Index is gaining 0.5%, Italy's FTSE MIB Index is increasing 0.4%, Spain's IBEX 35 Index is advancing 0.9%, and Switzerland's Swiss Market Index is trading 0.7% higher.
Asia mostly higher on trade and data
Stocks in Asia finished mostly to the upside, with the global markets continuing to monitor headlines regarding progress of a U.S.-China "phase one" trade deal, of which resurfacing uncertainty has stymied sentiment this week. White House economic adviser Larry Kudlow noted yesterday that a deal was getting close, though a Chinese Ministry of Commerce spokesperson was cited as saying the rolling back of tariffs is key to an agreement. The two sides are expected to hold phone conversations today and amid the resurfaced uncertainty Schwab's Jeffrey Kleintop, discusses in his latest commentary, Tied to Trade: What's Next for Emerging Market Stocks?, how a wide range of outcomes from -10% to +40% may lie ahead of emerging market stocks depending on the timing and details of a trade deal. Japan's Nikkei 225 Index rose 0.7%, with the yen giving back some of a recent rise and data showing the nation's industrial production was revised to a higher rate of expansion for September. China's Shanghai Composite Index declined 0.6% and the Hong Kong Hang Seng Index finished flat after a string of losses that have come from the escalated Hong Kong unrest. Australia's S&P/ASX 200 Index advanced 0.9% and India's S&P BSE Sensex 30 Index nudged 0.2% higher ahead of some trade data as the markets were closing, which showed the decline in exports decelerated in October. South Korea's Kospi Index rose 1.1%, with semiconductor-related stocks finding support following another dose of upbeat earnings results from the sector.
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