- Stocks higher amid upbeat earnings, ahead of Fed speech. U.S. equities are recouping some of Thursday’s losses in early trading, helped in part by earnings beats from JP Morgan and PNC Financial. Look for a speech by Federal Reserve Chair Janet Yellen at 1:30ET to provide some direction for markets this afternoon. Looking back, the S&P 500 (-0.3%) rallied throughout yesterday’s session after sinking more than 1% shortly after the open, but late-day weakness pulled the index back into the red; the financials and technology sectors led to the downside. Overseas, markets in Asia got a boost from Chinese inflation figures that showed prices moving higher for the first time in five years; the Hang Seng (0.9%), Nikkei (0.5%), and Shanghai Composite (0.1%) all closed higher. Positive sentiment in Asia carried into European trading with stocks up more than 1.5% midday. Elsewhere, WTI crude oil is near flat, while the risk-on bias is pushing COMEX gold and Treasury prices lower; the yield on 10-year notes is near 1.77%.
- Overseas markets whipsawed by conflicting data. Thursday morning’s Chinese trade data were disappointing and created weakness in some Asian markets. But last night’s release of Chinese inflation cheered traders overnight. Consumer inflation was up 1.9%, better than expected. Producer prices finally turned positive, up 0.1% after a period of decline, and again better than expected. This news boosted Asian markets. Note that the Hong Kong market, where many major Chinese stocks trade, has been more sensitive to mainland economic data than the Shanghai market itself.
- Now it really begins. Today we have what we would call the first batch of meaningful earnings reports for look-throughs across a key sector: financials. With today’s results, we would say the winners are trading, credit conditions, and expense management. We would call net interest margin a loser and loan growth mixed (call it a tie) with good growth but evidence of a slowdown. Though not a favorite sector, thanks to rising interest rates the outlook for the sector has improved. Next week marks the first peak weak of the season with more than one quarter of the S&P 500 slated to report.
- Housing, manufacturing, the Fed’s Beige Book and China’s Q3 GDP on tap next week as earnings reporting season heats up. Readings on the health of the housing market as Q3 ended and Q4 began are due out next week (we check in on housing in this week’s Weekly Economic Commentary), along with the Fed’s Beige Book ahead of the early November Federal Open Market Committee (FOMC) meeting. Overseas, the European Central Bank, the Bank of Canada and Brazil’s central bank meet next week, with Brazil expected to cut rates. China will release its Q3 gross domestic product (GDP) data early next week, as investors begin to digest the heart of the Q3 earnings reporting season for S&P 500 companies.
- September retail sales better than expected but softer than the headline. Retail sales rose 0.6% between August and September, matching consensus expectations and rebounding from the -0.2% reading in August. However, core retail sales (sales excluding gasoline, autos and building supply stores) rose just 0.1% in September, falling short of expectations (0.4%), but still an improvement from the 0.1% drop in August. Core retail sales feed directly into the consumer spending portion of GDP. Core retail sales in Q3 rose just 1.1%, after a robust 6.7% increase in Q2, suggesting some deceleration in consumer spending in Q3, although the retail sales data are not adjusted for inflation. The retail sales data keeps Q3 GDP on track for a 2.5 to 3.0% gain and keeps the Fed on track to raise rates in December.
- Today in the LPL Research blog we take a look at a popular election proxy, the Mexican peso. A Donald Trump victory may potentially have dramatic effects on U.S. trade with our southern neighbor and could potentially harm the Mexican economy. Trump has been very vocal about his desire to renegotiate trade agreements with Mexico, China, and others. The currency has firmed in recent days as polls have indicated Trump has fallen further behind.
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