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After The Close - The stock market started out the new week with a quiet, but constructive, session. At the close of trading, the Dow Jones Industrial Average was ahead roughly 85 points; the broader S&P 500 Index was up four points; and the NASDAQ was higher by 18 points. However, market breadth suggested a somewhat divided showing, as advancers and decliners were just about even on the NYSE. From a sector point of view, the technology, financial, and energy names displayed some leadership, while the healthcare stocks and the utilities declined modestly.

Traders received only one economic report this morning. The lack of news may have contributed to the market’s lackluster tone. Specifically, the Empire Manufacturing Index, which measures conditions in the greater New York region, provided a reading of 30.2 for the month of October. This showing was far better than analysts had anticipated and was also well above the September figure. Tomorrow will be a busier day for news. Of note, we will get a look at the latest monthly import and export prices, as well as the industrial production report for the month of September.

Elsewhere, the third-quarter earnings season is now underway. While few major companies posted their results today, a couple of stocks did make pronounced moves. Shares of Sears Holdings (SHLD) traded lower, after a major shareholder announced plans to leave the company’s board of directors. Furthermore, shares of Ruby Tuesday (RT) surged on news that the struggling restaurant operator has agreed to be taken private.

Technically, equities continue to drift higher. However, much will depend on the quality of the corporate profit reports that will be released over the next few weeks. - Adam Rosner

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

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11:45 AM EDT - The major U.S. equity indexes hit new record intra-day highs this morning. Still, the overall performance of the U.S. equity market can be termed mixed, with the small-cap sector putting together a lackluster showing today. Ahead of a slew of earnings reports from Corporate America, beginning with four Dow-30 companies tomorrow, the investment community has looked elsewhere and back to last week for its trading cues this morning. With regard to the latter, the investment community, after a muted reaction to the banking reports last week, are buying the banking stocks this morning, which is helping the financial group. Likewise, strong economic data from China is giving a boost to equities around the globe, with much of the attention going to the basic materials group. China is a big commodities consumer. Nevertheless, with the lack of major market-moving news stateside, the major averages have not strayed too far in either direction from the neutral line.

As noted, the earnings season heats up tomorrow morning. The consensus is calling for solid results for the S&P 500 companies, 55 of which will report earnings this week. Of the 32 S&P 500 companies to report results so far, more than 80% have beat the Wall Street consensus, which is a positive sign of things to come over the next fortnight. Investors should note that video-streaming pioneer Netflix (NFLX) reports third-quarter results after today’s closing bell.

From a sector perspective, it is an even split between up and down arrows among the 10 major equity groups. Not surprisingly, given the aforementioned positive economic data out of China, the basic materials stocks are getting some buying interest this morning. In particular, China is the world’s largest consumer of copper, and the price of the red material is rising today. Likewise, the energy stocks are on the upswing, getting a boost from higher oil prices. Escalating tensions between the Iraqi government and Kurdish forces are seen as a threat to the world’s oil supply. Shares of Dow-30 components Exxon Mobil (XOMFree Exxon Mobil Stock Report) and Chevron (CVXFree Chevron Stock Report), which are scheduled to report their latest quarterly results this Friday, are up in intra-day trading on the aforementioned news. Conversely, we are seeing some modest profit taking in the industrial, utilities, and consumer segments.

Looking ahead to the second half of the session, market fundamentals are not providing much of a sense of which way the market is headed this afternoon. The gains for the major U.S. equity indexes are only modest, the spread between advancing and declining issues on both the Big Board and the NASDAQ is thin and narrowing, and we are now seeing some more red in the broader small-cap sector than we saw earlier this morning. This is likely setting the stage for a game of tug-of-war between the bulls and the bears into the closing bell. Right now the former is holding a slight advantage. Stay tuned. – William G. Ferguson

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

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Before The Bell - At the midway point of October, a month that historically, at times, has proven to be very difficult for those long equities, the bulls are more than holding their own. In fact, the major equity averages ended last week at or near record highs, with the Dow Jones Industrial Average within a stone’s throw of the 23,000 mark. For the week, the Dow 30, the tech-heavy NASDAQ Composite, and the broader S&P 500 Index all finished modestly higher.

Providing support to equities has been solid to, at times, very strong data on the U.S. economy, including notable reports this month on manufacturing and nonmanufacturing activity and retail sales. That, along with hopes that some tax reforms will be passed by Congress before year’s end and still very few attractive investment alternatives to stocks in this low interest-rate environment, has been the perfect cocktail for those long the stock market.

Meantime, the attention of the investment community will shift to Corporate America, with the commencement of third-quarter earnings season last Thursday. Last week, four of the nation’s largest banks by assets reported their latest quarterly results and it mostly made for good reading. Banking giants JPMorgan Chase (JPM - Free JPMorgan Chase Stock Report), Citigroup (C), and Bank of America (BAC) all surpassed bottom-line expectations, while Wells Fargo’s (WFC) results came in on the light side. All in all, the banks were helped by slightly higher lending rates during the September quarter. This week, the earnings news kicks into high gear, highlighted by reports on nine Dow-30 companies. The current consensus calls for solid, if not spectacular, gains for the S&P 500 companies.

On the business beat, the data, as noted above, have proven supportive for stocks. The story was no different on Friday, as the Commerce Department reported a surge in retail sales last month, increasing 1.6% sequentially and 4.4% year over year. It is sign that the consumer is feeling good and likely augurs well for the retailers with the holiday shopping season now just a little bit more than a month away from commencing.

Partly helping the psyche of the consumer is hope that some form of tax reforms may be in the works on Capitol Hill. A few weeks ago, the Trump Administration proposed an aggressive plan to cut corporate and individual taxes, but that proposal will likely need to be negotiated in the Senate if Congress is to pass some tax reforms before it breaks for the Christmas recess in about 60 days from now. Wall Street appears to be betting that some tax reform legislation will be passed before year’s end.

Turning to the week at hand, the investment community will be focused on earnings. However, we will get some notable reports on the economy, with data due on industrial production, housing starts, and existing home sales. We will also get the latest Federal Reserve Beige Book summation of economic conditions on Wednesday afternoon, which will be closely scrutinized by the central bank in formulating monetary policy. The current consensus is that the Fed, which holds a two-day monetary policy meeting at the end of this month, will hold rates steady at that meeting but tighten the monetary reins at its December gathering.

With less than a half-hour to go before the start of the new trading week stateside, the futures are presaging a higher opening for the U.S. equity market. Overall, the bulls are off to a good start, as international stocks and commodities are rising, emboldened by upbeat economic data from China. Likewise, oil prices are rising on reports of an escalation in fighting between the Iraqi’s government and Kurdish forces, which may threaten supply. Stay tuned.   - William G. Ferguson

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