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Helped By Soothing Comments from the Fed, Stock Markets Shake Off Early Weakness to Close Positive


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

Market volatility was very high yet again today. The S&P 500 future traded in a 55 point range from the early morning low to the high late in the afternoon. It also formed a short-term double bottom against yesterday's low of 1813, which is conspicuously a 10% correction from the peak, to the penny. Weekly jobless claims fell to 264K, the lowest since April 2000.

European markets were stressed in early trading and concern increased over Greece's ability to service its debt and obtain future financing. Greece's stock market was down 3.68% at one point during the day and its 10-year sovereign bond yield has risen from 6.53% at the start of the week to 8.80% currently.

The majority of the strength in global markets was sparked by comments from St. Louis Fed President Jim Bullard. In an interview with Bloomberg, Bullard said that it might be necessary for the Fed to delay the ending of the asset purchase program due to the drop in inflation expectations. The comments sparked an immediate jump of 25 points in the S&P 500 (SPX) and that optimism carried over into the end of the day. The SPX traded as high as +0.73% before settling up 0.01%. Although it would be dangerous for the Fed to not complete its asset purchase program later this month as planned, the signal was clear that market had begun pre-emptively tightening to the degree that warranted a response from the central bank.

The strongest performer today was clearly energy stocks. The energy sector of the S&P 500 started the day off strong and that continued all day. After the government inventory report at 11:00am ET that showed a major increase in supplies, crude oil barely reacted, rallied, and then never looked back. The Oil Service Sector Index (OSX) finished the day up 1.2%. West-Texas intermediate crude oil futures closed up 1.34% to $82 and at one point during the day had risen five points from their overnight low.

Google (GOOG) reported third-quarter results after the close. Both revenues and earnings were below consensus estimates, and the stock dropped about 2% in extended trading.

Shares of Apple (AAPL) slid 1.3% as it announced new models for its iPad and Mac product lines. While the company's announcements were well-received by the media, they were seen as mostly incremental and not major drivers of increased sales.

Tomorrow's Financial Outlook

Many investors are concerned that tomorrow we may see a re-run of the trading from last Wednesday and Thursday. After the FOMC minutes last Wednesday, the S&P 500 retraced 1.6% of its losses, only to reverse all of those gains and then some the next day. By all counts, yesterday's turn looks to be confirmed today, but investor sentiment is still fragile. More housing data is due out for September. Housing starts are expected to rise to an annualized rate of 1.008 million from 956K in the month prior and permits up to 1.030 million from 998K prior. The preliminary University of Michigan/Reuters consumer confidence for October is expected to decline moderately to 84.0 from 84.6 last month. It is likely due to Ebola scares and recent declines in asset prices that it could miss to the downside.

The only major economic report scheduled for tomorrow is Canada's consumer price index. European car registrations will also be released.

The last bank earnings are scheduled for tomorrow. On the calendar are reports from Honeywell (HON), General Electric (GE), Kansas City Southern (KSU), Suntrust Bank (STI), Synchrony Financial (SYF), Morgan Stanley (MS), and Bank of NY Mellon (BNY).

Twitter: @Minyanville

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No positions in stocks mentioned.

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