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Washington Inches Toward Resolution on Debt Ceiling, and the Bulls Celebrate


Today's financial recap and tomorrow's financial outlook.

The S&P 500 (INDEXSP:.INX) rallied on Friday in the face of mediocre bank earnings as optimism about a debt ceiling resolution grew.

The US will hit a deadline to increase the debt ceiling next Thursday. However, Wall Street is increasingly viewing a resolution as inevitable, with at least a short-term fix to keep the government open on the way. The White House and House Republicans are engaged in active talks and at day's end, the White House announced that both sides have taken a default off the table.

The bullish movement on Friday put the market up about 3% above Wednesday's intraday low, and within striking distance of all-time highs.

Due to the shutdown, we did not receive September retail sales, PPI, or business inventories reports that were due out today. However, we did receive the October Michigan Sentiment Survey, which registered at 75.2, just ahead of consensus. However, it was down slightly from September's 77.5.
In stocks, shares of JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) both fell after the companies reported mixed third-quarter earnings. Both companies reported higher-than-expected profits, but the gains were primarily the result of the release of loan loss reserves rather than demand, and both companies missed on the revenue line.

Nonetheless, there were still some standouts in the sector, namely the capital-markets-focused Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), and Deutche Bank (NYSE:DB).

Homebuilders also stood out on Friday, with the SPDR S&P Homebuilders ETF (NYSEARCA:XHB) trading up 1.7% after an analyst upgrade of key sector names Lennar (NYSE:LEN) and KB Home (NYSE:KBH).
On the negative side, silver and gold had a rough day, each selling off more than 2%. In fact, at one point early on in the day, gold trading was halted on the CME. Crude oil also sold off aggressively early, but recovered somewhat by day's end.

Monday's Financial Outlook
There are no economic reports or major earnings releases scheduled for Monday, which is Columbus Day.
However, traders should be aware the market could very easily be moved by the news out of Washington -- a theme that may play out throughout the week as many of next week's important economic reports, like the CPI, are on the shelf until the government reopens.

Twitter: @Minyanville

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No positions in stocks mentioned.

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