Stock Market Today: Dow Gains on Strong September Retail Sales

Stocks closed mostly higher Thursday as investors cheered the latest round of corporate earnings. A solid reading on retail sales also helped boost sentiment too.

Starting with the earnings calendar, Taiwan Semiconductor Manufacturing (TSM) blew Wall Street away with its third-quarter results.

For the three-month period ended September 30, the semiconductor manufacturer said earnings jumped 50% year-over-year, while revenue rose 36%. TSM also issued a strong outlook for its fourth quarter, citing encouraging demand for artificial intelligence (AI) and smartphone chips.

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Needham analyst Charles Shi expects this impressive growth to continue over the next few years "primarily driven by steady introductions of new technology nodes that are largely unaffected by industry cyclicality."

He recommends "TSM stock as a core holding for investors who look to invest in semiconductors, which we view as the foundation of the expanding digital economy."

As a result of its impressive beat-and-raise quarter, the semiconductor stock soared 9.8% and closed above the $1 trillion market-cap threshold for the first time ever. TSM's surge also had a halo effect on other chipmakers, including Nvidia (NVDA, +0.9%) and Broadcom (AVGO, +2.7%).

Elevance Health earnings pressured by rising Medicaid costs

Elsewhere, Elevance Health (ELV) stock tumbled 10.6% after the health insurance company reported lower-than-expected earnings for its third quarter and cut its full-year profit forecast due to "unprecedented challenges" and rising costs in its Medicaid business.

Still, most of Wall Street remains upbeat on ELV. "We believe the power of Elevance's idiosyncratic long-term growth drivers has been significantly underappreciated by investors," writes Baird analyst Michael Ha in an October 15 note.

Positive developments in its Carelon healthcare services segment have the company "fully on its way to closing the valuation multiple gap to both UnitedHealth Group (UNH, -0.9%) and Humana (HUM, +4.2%)," he adds.

Lucid shares sink on stock offering news

Lucid Group (LCID) was another notable decliner, plunging 18.0% after the electric vehicle maker announced a public stock offering of nearly 262.5 million shares. The company also warned that it anticipates third-quarter losses from operations to range between $765 million to $790 million, more than the $752 million analysts forecast.

Stifel analyst Stephen Gengaro has a Hold rating on the EV stock amid concerns over Lucid's significant cash burn. However, he also thinks the company's Lucid Air electric car is an "outstanding vehicle" and believes the recently unveiled Gravity SUV will give it access to the lucrative sports utility vehicle segment.

Retail sales come in strong for September

In economic news, data from the Census Bureau show retail sales rose 0.4% from August to September and were up 1.7% year over year. The month-over-month gain exceeded the 0.3% increase economists were expecting as well as the 0.1% improvement seen the month prior.

Excluding automobiles and gasoline, retail sales were up 0.7% on a monthly basis and 3.7% annually.

"The economy is in pretty good shape," says Bill Adams, chief economist at Comerica. "With the Fed expected to continue lowering interest rates through the turn of the year, credit-sensitive sectors of the economy should perk up in coming quarters, sustaining the economic expansion into 2025."

Jim Swift, CEO of Buxton, a leading consumer intelligence platform, notes that the September retail sales data "reflects growing consumer confidence as well as evolving dynamics in spending habits." Indeed, nonstore retailers, which include e-commerce sales, were up 7.1% year over year.

"Retailers with strong online and physical store integration are well-positioned to capitalize on this momentum as we head into the holiday season," Swift adds.

As for the main indexes, the Dow Jones Industrial Average gained 0.4% to 43,239 and the Nasdaq Composite added 0.04% to 18,373. The S&P 500 ran out of steam near the close, ending down 0.02% at 5,841.

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