EmailThe stock market was little changed Thursday, yet that was ultimately a disappointing showing since gains registered earlier in the session were unable to hold up. The S&P 500 broke its four-day losing streak, but only by the hair of its chinny chin-chin. 0.29 points was all that separated the S&P 500 from a fifth straight losing session.
A striking earnings warning out of Dollar Tree (DLTR) got in the way of the early rebound effort. Remarks on the fiscal cliff from former White House Chief of Staff Erskine Bowles, former Republican senator Alan Simpson, and Goldman Sachs CEO Lloyd Blankfein, however, successfully deflated bullish sentiment.
Briefly, Erskine Bowles and Alan Simpson in particular expressed a growing sense of angst about an inattention to the spirit of compromise and the lack of progress by Congress in dealing with the fiscal cliff. Bowles placed only a 30% probability on a deal getting done before we go over the cliff.
The gentlemen also provided the sobering assessment that an adverse fiscal cliff outcome is not priced in the market. We issued a similar warning in our updated Market View (Oct. 4) while Blackrock, the world's largest asset manager, issued a similar statement today.
Listening to the Vice Presidential debate last night, the divide between Republicans and Democrats was plain to see and it did nothing to ensure that a spirit of compromise will be reawakened in a lame duck session of Congress.
The latter point notwithstanding, the equity market is indicated to open higher as evidenced by the S&P futures, which are trading 0.3% above fair value.
Better-than-expected earnings from JPMorgan Chase (JPM), which beat by $0.19 on strong mortgage business activity, have overshadowed a revenue warning from semiconductor maker Advanced Micro Devices (AMD), and have fueled the hope that other financials will follow suit.
Wells Fargo (WFC) for its part beat by a penny, yet its stock is trading more than 2.0% lower in pre-market action. WFC had gained as much as 20% since June 1, making it plausible that some owners of the stock are disappointed by the small upside and are now taking profits.
The Producer Price Index for September didn't produce any major surprises. Higher energy prices were the principal factor behind the 1.1% increase in finished goods (Briefing.com consensus +0.8%). Excluding food and energy, though, core prices were flat (Briefing.com consensus +0.2%).
Pipeline pressures intensified slightly in September, however. After four consecutive months of decline, core intermediate goods prices rose 0.6% while core crude goods prices jumped 1.6%.
The preliminary reading for the University of Michigan Consumer Sentiment Survey for October (Briefing.com consensus 78.5; prior 78.3) will be released at 9:55 a.m. ET and it could be a market mover.
What participants will be really focused on though, given the inability to build on the post-QE3 rally, is if there will be follow-through buying interest after the open or the tendency to sell into strength persists.
At yesterday's closing price of 1432.84, the S&P 500 is approximately four points below the level it closed at on September 12 -- or the day before QE3 (aka "QE Infinity") was announced.
