After The Close -It was a rollercoaster week for the U.S. equity market, with the ongoing negotiations on Capitol Hill driving the direction of trading. The continuing contentious fiscal talks have overshadowed the start of earnings season and drawn even more of the attention of the investment community than normally would be the case as the U.S. economic data (scheduled to be released this week) were postponed by the related ongoing government shutdown, which is now in its 11th day. The major equity averages, most notably the technology-heavy NASDAQ, were under significant selling pressure during the first few days of this week before reversing course and moving notably higher during the final two days of the volatile five-day stretch on Wall Street. Meanwhile,

Today was another productive day for those long equities, though nowhere near as fruitful as yesterday. To wit, stocks received a positive jolt from reports that political leaders from both parties had returned to the bargaining table, raising hopes that a deal, even if only a temporary one, can be reached to increase the debt-ceiling limits. The failure to come to an agreement by the October 17th deadline could force the U.S. to default on its loans, an event that would likely have serious worldwide financial and economic consequences. As we stand now, President Obama has concluded his meeting with Republican leaders, but no deal had been reached as of yet. Still, despite the latest proposal from the Republicans, it does not appear as though the two sides have made much progress in the negotiations that are expected to continue through this weekend.

All told, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 Index added 111, 31, and 11 points, respectively, today, building off of yesterday’s outsized rally. Also encouraging was the even bigger gains booked by the small-cap Russell 2000 and S&P Mid-Cap 400 Index, a sign that investors are feeling a bit better and are not against adding some more risk to their portfolios. The buying was pretty broadbased, with advancing issues ahead of decliners by a considerable margin on both the New York Stock Exchange and the NASDAQ.

From a sector perspective, leadership came from the economically sensitive sectors, most notably the energy, industrial, and financial stocks. However, one exception was the basic materials issues. The materials group was hurt by a sharp drop in precious metals stocks. In particular, shares of gold mining companies, along with gold prices, fell, as investors anticipated a deal in Washington that would avert a default on the U.S. government's debt, a scenario that would lessen demand for the safe-haven holding. Meantime, within the financial group, the investment community’s attention was on JPMorgan Chase (JPM - Free J.P. Morgan Chase Stock Report) and Wells Fargo (WFM), as those two banking giants reported their latest quarterly results before the market opened this morning. Next week the earnings reporting season kicks into high gear, led by reports from nine Dow-30 companies. Technology giant Google (GOOG) is also scheduled to report its latest quarterly results. How big of an impact these reports have on trading will depend largely on how much progress is made in the budget and debt-ceiling limit negotiations.

Meantime, the ongoing federal government shutdown will put a few more important reports on the economy in jeopardy next week, including the latest data on consumer prices, housing starts, and industrial production. The recent postponements, which included data on the labor market, will probably make investors give a closer look at the Federal Reserve’s latest Beige Book summation of economic conditions, which is due next Wednesday afternoon. That report may also shed some light on what the central bank is thinking ahead of its two-day monetary policy meeting scheduled for October 29th and 30th. The lead bank’s bond-buying program will be the main topic for the Fed officials at that monetary policy gathering. A change in monetary policy—which is looking less likely especially with the ongoing government shutdown probably cutting into fourth-quarter GDP growth—would be a game changer for the equity market. Historically, the investment community has not greeted a Fed tightening warmly. - William Fergusson  

At the time of this article’s writing, the author did not have positions in any of the companies mentioned. 


12:15 PM EST - The U.S. stock market is putting in a positive, but choppy, session today, with some momentum evolving as we pass the noon hour in New York on hints of progress in Washington. Notably, yesterday’s rally largely reflected an improvement in the political climate in Washington. However, there is still work to do. The nation’s budget and debt related issues are far from solved, and traders are aware that these issues will remain an area of concern, at least for a while. Moreover, the government has yet to get back to business, and that is also a key point. Meantime, the Dow Jones Industrial Average is up 86 points as the afternoon begins; the broader S&P 500 Index is higher by nine points; and the technology-heavy NASDAQ, which is displaying some relative strength, is adding on 23 points. Market breadth now suggests a positive session, as advancing issues are nicely ahead of decliners on the NYSE. 

All of the market sectors are making progress today. There is some leadership in the technology stocks, as gains in the computer and software names are offsetting weakness in the semiconductor area. The energy issues are also up a bit, helped by strength in the exploration and production names. Nonetheless, there has been a bit of sluggishness in the consumer area. Basic materials issues are lagging, too, with declines in the mining shares. Notably, the price of gold is about 2% lower today. 

Technically, the S&P 500 Index is now back above its 50-day moving average of 1,679, and this is encouraging to traders and technicians. From here, the bulls will have to push the broad index through the widely-watched 1,700 mark on a sustained basis, an area that holds some “psychological” significance. Notably, this area had presented resistance in the past, particularly in late July and early August. The VIX, which dropped about 16% yesterday, is heading lower again today, further suggesting that the mood is less apprehensive. 

While the economic news has been limited this morning due to the government shutdown, traders did receive one report worth noting. Specifically, the University of Michigan’s Consumer Sentiment Index slipped to 75.2 in October, according to the initial reading. This results was a bit lower than had been anticipated, and also fell below the September figure. Consumers may be feeling less optimistic, as a result of the government shutdown and debt ceiling debate.

In corporate news, shares of Micron Technology (MU) are trading lower today, after the widely-watched memory chip maker company issued a mixed release. As for the major banks, while investors seemed initially pleased with J.P. Morgan Chase’s (JPM - Free J.P. Morgan Chase Stock Report) release, that stock has since surrendered its gains. Moreover, Wells Fargo (WFC) stock is down slightly, as investors may be concerned about revenues.   – Adam Rosner

At the time of this article’s writing, the author did not have positions in any of the companies mentioned. 


Stocks to Watch from The SurveyFinancials are in the spotlight today, as two of the nation’s largest banks, Wells Fargo (WFC) and JPMorgan Chase (JPMFree JPMorgan Stock Report), reported third-quarter results this morning. Investors seemed pleased with JPMorgan’s adjusted earnings and other operating metrics, and the stock is trading slightly higher in the premarket as a result. However, Wall Street was not as enthusiastic with the quarterly financials from Wells Fargo, and the equity is indicating a moderately lower opening this morning. Shares of semiconductor company Micron Technology (MU) are also down a bit ahead of the bell on earnings news. The big winner, however, appears to be shares of Safeway (SWY), which are up notably in the premarket. The grocer’s third-quarter earnings were nothing to write home about, but revenues were better than expected. The company also announced plans to sell its Dominick’s stores and exit the Chicago market. Finally, The Gap (GPS) stock is indicating a lower opening this morning, after the retailer announced disappointing same-store sales for the month of September. – Matthew E. Spencer

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.


Before The Bell - It didn't take much. Indeed, just the suggestion that the House of Representatives would attempt to secure a short-term extension of the federal government's borrowing authority, thereby giving the two sides in Washington time to hammer a more-lasting accord, was enough to send the recently faltering U.S. equity market to dramatic gains yesterday.

On count, after an impressive opening by the bulls, the buying picked up as the day wore on, with stocks barely stopping to catch their breath. It was a veritable buying panic that picked up momentum into the close.

Behind the buying was a sense of relief that a potential debt default, an unwanted outcome of the impasse in the Capitol, might not evolve on October 17th, the date that the Administration claims would necessitate a default as we would be unable to pay our interest bill on the massive amount of borrowed capital incurred by our nation--much of it in the hands of foreign buyers, such as China.

What a short-term accord would buy is time for the politicians to turn down the heat while a longer-term deal is structured, hopefully during the interim six weeks, or so, suggested by any accord. Meanwhile, armed with this favorable development, the stock market soared, with the 30-stock Dow Jones Industrial Average climbing back past the psychologically important 15,000 level, to a close of 15,126. In all, it posted a gain of 323 points. The NASDAQ also scored a dramatic increase, advancing 83 points, or better than  two percent. Turning in a stellar performance, as well, was the small-cap Russell 2000 Index, which jumped 26 points, or 2.50%. It was a wire-to-wire win for the bulls, after two days early this week when the market appeared to be close to a meltdown.
Meanwhile, the Beltway drama is somewhat blurring the start of earnings season as a market-moving event. However, profits are rolling in, nonetheless, and at some point the focus will return to the normal seasonal pattern, in which October is always held in the grip of scores of daily reports from Corporate America. And this morning, banking giant and Dow-30 component JPMorgan Chase (JPM - Free JPMorgan Stock Report) has reported in-line results after adjustments. That stock is indicating a slightly higher opening today, in response.

Also in the news, but currently taking a backseat to the goings on in the Capitol, is the nomination of Janet Yellen as Chairwoman of the Federal Reserve. Her accession, albeit not a foregone conclusion, seems more than likely, although as with most everything in Washington these days, there will be some opposition. It seems as though little is routine in the halls of Congress nowadays.

Our sense, as we get ready to start another day on Wall Street, is that a default will be avoided, but not without some additional back-and-forth negotiating, which, unfortunately, is never an easy matter. However, just having the two sides talking is a consolation of sorts, and one that seemed less than certain a day or two ago.  

Meanwhile, the release of some pivotal monthly government reports on the economy is also a casualty of the ongoing deadlock in the Capitol, with such important issuances as non-farm payrolls, industrial production, retail sales, producer and consumer prices, and the trade gap being delayed because of the partial government shutdown. True, this aspect of the deadlock, although of less concern than a default, is still on the collective minds of both Wall Street and Main Street, at this time.

Now, as new day is about to get under way on Wall Street, and the giddiness of yesterday on our shores is making its way across the sea, where the markets are now up in Europe, but not dramatically so. Over here, meantime, the futures are suggesting a flat-to-lower opening, when traders get down to business in about an hour from now. – Harvey S. Katz

At the time of this article's writing, the author did not have positions in any of the companies mentioned.