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After The Close - The stock market got off to a weak start this morning, managed to advance slightly around midday, but turned lower again in the afternoon. At the close of the day, the Dow Jones Industrial Average was down 32 points; the broader S&P 500 Index was off four points; and the NASDAQ was lower by 12 points. Market breadth showed a divided session, as advancing issues were about even with decliners on the NYSE. From a sector perspective, the consumer non-cyclical stocks and the basic materials issues moved higher, offsetting weakness in the telecom and energy names.

There were a few economic news items for traders to digest this morning. Specifically, the Producer Price Index (PPI) rose 0.4% during the month of September, which was in line with expectations. Meanwhile, initial jobless claims dipped to 243,000 for the week of October 7th, which was a better showing than most analysts had anticipated. Elsewhere, according to the EIA, crude oil inventories shrank by roughly 2.7 million barrels during the latest reported week. The price of crude oil, now just over $50 a barrel, softened on the news.

Finally, third-quarter earnings season has just commenced. Today we heard from a couple of leading financial institutions. Specifically, shares of JPMorgan Chase &Co. (JPMFree JPMorgan Chase Stock Report) moved lower. The banking giant posted respectable numbers, but concerns about trading revenues dampened investor sentiment. In addition, shares of Citigroup (C) also slipped today, after the bank posted decent results, stemming in part from lower costs. Tomorrow, we will hear from Wells Fargo (WFC) and Bank of America (BAC).

Technically, equities have held up well lately. However, with valuations elevated, traders will likely want to see solid third-quarter numbers and encouraging guidance to press forward from here. - 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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11:40 AM EDT - The major U.S. equity averages started the session ever so slightly in the red and have held those losses, for the most part, through much of the morning hours. The quarterly results from two banking giants (more below) were not enough to drive further gains in a market where valuations are already stretched. Thus, as we move closer to the noon hour on the East Coast, the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index are in negative territory, but none too far removed from the neutral line.

As noted, the start of the third-quarter earnings season did not provide the impetus to push the major averages higher from their already lofty perches. Although banking giants JPMorgan Chase (JPM - Free JPMorgan Stock Report) and Citigroup (C) posted solid quarterly results, the reports played into the narrative on Wall Street that bottom-line growth was likely solid, but far from spectacular, in the third quarter. While JPMorgan Chase easily beat Wall Street's third-quarter profit expectations, with loan growth and higher interest rates more than offsetting weakness in its market-related unit, investors were disappointed with the bank’s 27% dip in bond trading revenue, which likely has spilled over into the current period. Meantime, Citigroup reported a nearly 8% increase in quarterly profits, driven by a gain on an asset sale, lower costs, and better-than-expected trading revenues. The fourth-biggest U.S. bank by assets said that net income rose to $4.13 billion in the third quarter ended September 30th from $3.84 billion a year earlier. Shares of both banks are trading nominally lower today.

Likewise, we received some news from the business beat that failed to excite investors. Specifically, the Labor Department reported that producer (wholesale) prices rose 0.4% last month after increasing 0.2% in August. In the 12 months through September, the Producer Price Index jumped 2.6%, which marked the biggest gain since February 2012 and followed a 2.4% increase in August. The biggest contributor to the gain was a spike in oil and gasoline prices, which rose on production disruptions at oil refineries in Texas caused by Hurricane Harvey. The pricing data were not great news for equities, as it raised the likelihood that the Federal Reserve will increase the federal funds rate by 25 basis points in December. Historically, news of a monetary tightening doesn’t sit well with equity investors.

Not surprisingly, given the aforementioned reaction to today’s earnings news, the financial group is trading modestly lower this morning. Joining the financials in the red are the energy, discretionary, and telecommunications sectors. Conversely, there is some mild interest in the basic materials, technology, industrial, and utilities categories. The movements among the top-10 equity groups in either direction are relatively contained, which is reflective of an overall market where the spread between winning and losing stocks is razor thin on both the Big Board and the NASDAQ. In general, there is a slightly bearish undertone to trading so far today. - William G. Ferguson

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Before The Bell - The stock market, following another record-breaking performance on Tuesday, started out yesterday in mixed fashion, with the Dow Jones Industrial Average once more pushing higher to begin the trading session, while the other large-and small-cap indexes struggled around the neutral line. Early trading was dominated by jitters ahead of the 2:00 PM (EDT) release of the minutes from the last Federal Reserve Open Market Committee meeting on September 20th. At that get together, the central bank had voted to keep interest rates unchanged, while saying that it would start to pare back its $4.5 trillion balance sheet.

As the first hour concluded, however, the stock market started to firm modestly, with the Dow, the S&P 500, and the NASDAQ all crossing over into positive territory, as yet one more succession of record highs appeared ready to be set. Bonds, too, were gaining, as yields dipped after rising solidly last week. In addition to concerns about the Fed minutes, which were alleviated once the release was forthcoming (more below), investors also were anticipating the pending flood of third-quarter earnings reports. The few early issuances have been supportive, but the cumulative gains likely will ease back once the insurance companies report. 

Breaking the early action down, we saw that the 10 leading equity groups were just about split between gaining and losing sectors, while advancing stocks held a modest lead on declining equities on the Big Board and the NASDAQ. If the extended market advance is looking tired, it was not overly apparent in the early action. How much longer the latest rally will ensue is largely, we sense, a function of the upcoming earnings results, as well as whether there will be progress on the political front, namely from efforts to get tax reform through.  

The irregularly firmer pattern then persisted into the lunch hour, with the S&P Mid-Cap Index and the small-cap Russell 2000, in the red earlier in the session, gingerly crossing over into the plus column as the morning concluded. Meanwhile, the Dow pushed ahead a bit further, yielding yet one more all-time high. Things did not change much as 2:00 PM hour arrived and as the Fed minutes were released, which, as noted, created few waves. The Fed acknowledged, as expected, that it would start trimming the balance sheet that it had built up as a means to fight the last recession.

Meanwhile, with growth persisting in the economy, the central bank senses that it no longer needs this emergency measure. This likely shift, along with raising interest rates, should put monetary policy in line with the business upturn, which remains securely in place. The Fed will probably go slowly in this effort, so that the balance sheet reduction is as much of a nonevent as possible. After the release of the minutes, the market largely moved in place for the next hour, or so, with the large-cap averages retaining small gains, while the small-cap composites eased back modestly.      

We then saw some firming in the last hour of trading, albeit nothing dramatic, as the Dow would go on to a 42-point final win and another all-time record high. Gains also would be secured by the two other large-cap composites, with the NASDAQ's 16-point increase representing a very slight outperformance. As the closing bell sounded, there was about a four-to-three ratio of winners over losers on the Big Board, but little variance on the NASDAQ. Also, among the 10 principal equity groups, there were more groups on the rise than falling at the close, with technology leading the way, but basic materials lagging.   

Going forward, with yesterday's constructive session in hand, we note that the markets in Asia were trading higher in dealings in the overnight hours, while in Europe, the principal bourses are trending downward. Also, Treasury yields, which were relatively flat yesterday, are tracking lower so far this morning, while gold prices are up and oil quotations are down on rising inventories in early morning action. Finally, U.S. futures are showing early losses ahead of the 9:30 AM (EDT) open on our shores.   - Harvey S. Katz, CFA 

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