Stocks were lower as investors cringed at the first batch of quarterly earnings reports, which included weaker-than-expected results from aluminum producer Alcoa Inc.
While earnings news loomed large on Wall Street, investors were also waiting to get a clearer picture of where the Federal Reserve stands on interest rates and the threat of inflation. In the afternoon, the central bank is expected to release minutes from its last meeting.
The decline in stocks from lackluster earnings news occurred despite a report that the federal budget deficit fell to its lowest level in four years, about US$247.7 billion in 2006.
It's to be expected with an underlying bullish tone to the Dow. After beaking into a new record the Dow will meander about this upper range to consolidate before moving higher. The closing presage well for our market as the important interest rate trend is in a downward bias and oil is not likely to move higher any day soon.
US market closed flattish GREEN - Dow up 9.36 points to 11,867.17, while Nasdaq up 3.66 points to 2,315.43 .... Rock & roll time in October! Gotta be wary still.
Stocks turned higher as oil prices wilted amid confusion about whether OPEC would cut production.
Dallas Federal Reserve President Richard Fisher, meanwhile, said the decline in home prices won't spark a recession but warned that the U.S. central bank will raise rates again if inflation doesn't ease.
Comments by Fisher, who is not currently a voting member of the Fed's interest rate setting committee, pushed stocks initially lower but broad indexes recovered ground by midday after Fisher said he expects the lagging effects of past rate hikes to lower inflation.
Dow futures were unchanged at 11,928, Nasdaq 100 futures rose 3.75 points to 1,707.50 while S&P 500 futures were up 0.50 point at 1,359.70.
With Alcoa Inc. traditionally kicking off the earnings season with its quarterly results set to be released after the market closes, the next few weeks will all be about company profits living up to investor expectations, according to Marc Pado, U.S. market strategist at Cantor Fitzgerald.
"The question is, will earnings beat expectations and will that be sufficient to move stocks higher still?," said Pado. "With the Dow at a record high, the S & P at a bull-market high, and the NASDAQ back to the level from which the index broke down, it will take some serious numbers to move this market higher."
On Monday, stocks ended higher, with the Nasdaq Composite at its best level in five months, as a Fed official's soothing remarks on inflation, a going-private offer for Cablevision Systems and a $6 billion deal in the banking sector placed news of North Korea's nuclear test on the back burner. See full story.
Investors will get further insight into the Federal Reserve's thinking on interest rates and the economy with a speech from Dallas Federal Reserve President Richard Fisher at 9.50 a.m. Eastern.
On Monday, San Francisco Fed President Janet Yellen said holding interest rates steady "for a time" makes sense as monetary policymakers study data about the economy. See full story.
Wholesale inventory numbers for August are slated for release at 10 a.m. Eastern. Inventories are expected to have risen 0.6% after a 0.8% rise in July, according to economists polled by MarketWatch.
Crude futures fell as traders continued to look for some clarity from the Organization of the Petroleum Exporting Countries on its plans to cut production after several days of mixed messages from officials. Crude for November delivery was last down 45 cents at $59.51 a barrel.
Guess the North Korean nuclear test is like a 'FART' to the US ..... Dow down only 19 points and Nasdaq just Flat Green now. Gonna be a quiet day in US today due to Columbus Day holiday.
The SPX gained 1.6% last week, a rare event indeed for the final week of September. Since 1970, in fact, the SPX has gained at least 1% during September's final week only six times. These runups are typically followed by a volatile October.
Outside of the severe pullbacks that October has produced, the month has also provided some of the better average returns and is considered the leadoff month for a strong four months of performance. October boasts an average SPX return of 0.9% over the past 36 years, which puts it in a tie with April as the fourth best trading month. For the record, January and December (1.8%) and November (1.6%) top the list. What this means for today's market is that we are headed into what is arguably the most seasonally strong period of the year to be long the market.
Gonna to be a quiet trading day in US tomorrow due to Columbus day. But note that earning season starts next week too. Happening time ahead ...
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Coming Week: Heavy Hitting By Gregg Greenberg TheStreet.com Staff Reporter 10/7/2006 9:04 AM EDT
Earnings season gets well under way next week with traders expecting fat corporate profits amid slowing economic growth.
"Last Friday's unemployment report stepped up concerns about the slowing economy, and that's going to heighten the focus on the sustainability of corporate profits," says Larry Perruzi, equity trader at Boston Company Asset Management.
The Labor Department said last week that the economy added 51,000 jobs in September, well below economists' expectation for a gain of roughly 120,000 jobs. The data, however, were somewhat mixed. Payroll numbers for August were revised higher to 188,000 jobs added, from the previously reported 128,000. The unemployment rate dipped to 4.6% from 4.7%.
The stock market will be open for business on Monday; however, most federal government offices, including the Federal Reserve and the U.S. government bond market, will be closed in observance of Columbus Day.
All of the markets will be open on Tuesday when Dow component Alcoa (AA - news - Cramer's Take) kicks off earnings season with its quarterly results.
Some positive news on US housing from the ex-Fed chief .... Housing slowdown is such a big headache and can pull US into a recession. Thanks to Greenspan!
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Greenspan sounds optimistic note on housing: report
The September employment report was the market's focal point on Friday and what it saw didn't generate too much concern. Granted a lower than expected increase in nonfarm payrolls was disappointing in its own right, but when coupled with the sharp upward revision to August payrolls, it conveyed a message that the labor market is still solid and that the Fed will again refrain from raising interest rates at this month's FOMC meeting.
Overall, it was a fairly neutral report. The market's performance suggested as much, as the indices suffered only modest losses despite being up big for the week entering Friday's session.
From a corporate standpoint, the big item of the day was an early-afternoon report that Kirk Kerkorian's Tracinda Corp. had indicated it won't pursue the purchase of an additional 12 million shares of General Motors' stock after the auto maker terminated its alliance discussions with Renault and Nissan. In addition, it was noted that Kerkorian's lieutenant Jerome York resigned from GM's board.
The aforementiond news triggered a knee-jerk dip in the indices that carried them to session lows, but they soon bounced back in a reflection of the market's underlying bullish bias.
Employers added just 51,000 jobs in September, the fewest in almost a year, while the unemployment rate dropped down to 4.6% -- offering a mixed picture of the nation's jobs climate.
Still, the new figures released by the Labor Department on Friday suggested that although the economy has moved into a slower phase of growth, it is not in danger of sliding into a recession, analysts said.
The new tally of payroll jobs added to the economy fell short of the 120,000 positions analysts were expecting. However, job gains for both July and August turned out to be bigger than previously estimated, helping to take some of the sting out of September's tepid payroll figure.
In August employers added 188,000 jobs, a much stronger figure than the 128,000 reported last month. In July, 123,000 positions were added, up slightly from a previous estimate of 121,000.
Financial futures that allow traders to bet on interest rates showed yesterday a 60% chance the Fed will cut its benchmark lending rate to 5% by March, up from 50% on Oct. 3.
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