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Post-CPI Report Surge
Equities responded to a significant drop in rates following the release of the October Consumer Price Index, which turned out to be better than expected. It seems like the market is aligning with the idea that the Fed might be done raising rates for now.
Breaking down the numbers, the Total CPI remained unchanged month-over-month, coming in at 3.2% year-over-year, a dip from 3.7% in September. Core CPI, excluding food and energy, showed a slight increase, up 0.2% month-over-month and 4.0% year-over-year.
The Fed funds futures market responded swiftly, pushing the probability of additional rate hikes down. Now, it’s signaling a 65.4% chance of the first-rate cut happening in May 2024, according to the CME FedWatch Tool.
Interest rates also took a dip, with the 2-year note yield settling at 4.82%, 22 basis points lower than yesterday, and the 10-year note yield dropping to 4.44%. The U.S. Dollar Index followed suit, sinking 1.5% to 104.05.
Recent Highlights From The Earnings Reports
Home Depot HD 0.00%↑, reported $3.81 EPS, beating the expectations with just 1.47%.
Tyson Foods TSN 0.00%↑, reported $0.37 EPS, beating the expectations with 12.12%.
What To Watch Today
8:30 ET: Weekly Initial Claims (prior 217,000), Continuing Claims (prior 1.834 mln), October Import Price Index (prior 0.1%), Import Prices ex-oil (prior -0.2%), Export Price Index (prior 0.7%), Export Prices ex-agriculture (prior 1.0%), and Philadelphia Fed Survey (prior -9.0)
9:15 ET: October Industrial Production (prior 0.3%) and Capacity Utilization (prior 79.7%)
10:00 ET: November NAHB Housing Market Index (prior 40)
10:30 ET: Weekly natural gas inventories
16:00 ET: September Net Long-Term TIC Flows (prior $63.5 bln)1
Forecasts
🕵Discovering hidden treasures.🕵
1) Measured Move In Trend Channel Formation On CAT 0.00%↑.
CAT 0.00%↑ Price is starting to increase after finding support on the long-term uptrend line right around the Earnings report (31st Oct).
The pattern takes the shape of a textbook example for a measured move, where the second and third legs in an uptrend advance should duplicate the size and slope of the first leg.
The pattern has been forming over the span of more than 14 months, to be precise around 414 days, making it significant.
Volume has significantly increased around the bottom, confirming support and heightened interest in the stock at these levels.
If support keeps on holding with high volume, then it would be confirming the trend continuation. And potential new leg higher may be expected up to the zone of the most recent high or upper trend channel resistance line.
On 1st November Goldman Sachs - Confirmed its grade on CAT 0.00%↑.
From: Buy
To: Buy
On 16th October JP Morgan - Confirmed its grade on CAT 0.00%↑.
From: Overweight
To: Overweight
Price is likely to be headed upwards towards the 2-month average.
In the most recent quarter sales and revenues increased by 12% to $16.8 billion and operating profit increased by 42% to $3.4 billion.
Profit per share was $5.45, including restructuring costs of $0.07 per share. Adjusted profit per share increased by 40% to $5.52.
Recent Earnings make CAT 0.00%↑ look cheaper than before, with Price-to-Earnings ratio dropping to around 14.
The “cheapness” argument is rather confirmed by the Price to Cash Flow ratio.
CAT 0.00%↑ Recent Earnings Transcript Summary (Future potential, implied by management vision):
Backlog and Demand:
Ended the quarter with a healthy backlog of $28.1 billion.
Demand remains healthy across most end markets.
Moderation in order rates due to improved supply chain conditions.
Outlook and Full-Year Expectations:
Anticipates full-year 2023 results to be better than previously expected.
Expects adjusted operating profit margin to be slightly above the targeted range.
ME&T free cash flow expected to exceed the $4 billion to $8 billion target range.
End Market Insights:
Construction Industries in North America expected to see continued growth in non-residential construction.
Anticipates weakness in China but growth in Asia-Pacific (excluding China).
Resource Industries witnessing a high level of quoting activity with continued strength in mining.
Energy & Transportation remains optimistic, with strong demand in oil and gas and power generation.
Sustainability Journey:
Continuing to invest in products, technologies, and services for fuel flexibility, operational efficiency, and reduced emissions.
Highlighted low-carbon intensity solutions in Construction Industries and new G3600 Gen 2 engine with lower emissions.
Collaborations with customers, such as the zero-emissions lithium mine project with Albemarle, reinforce sustainability leadership.
Future Outlook and Market Conditions:
Expects another good year in 2024 based on backlog, dealer inventory, and current market conditions.
Continued strength in most end markets, with further details to be provided in the fourth-quarter call.
Disclaimer: Please note that the information provided in this article is for general informational purposes only and does not constitute financial, legal, or professional advice. The information provided should not be relied upon as a substitute for financial, legal, or professional advice. Before making any decision, it is important to consider all relevant information and consult with a professional who can provide personalized advice based on your specific circumstances. The author and publisher of this article cannot be held liable for any actions taken based on the information provided. This is not a recommendation to buy or sell any specific securities or financial instruments.
Source: Briefing.com