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Stock Win Streak at Risk as Street Braces for Earnings Unknown

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October 6, 2015

Pre-earnings choppiness may be in order with stocks tipping lower after several sessions of gains. That included five straight higher finishes for the S&P 500 (SPX)—its longest streak this year. European stocks pulled back slightly Tuesday after notching a two-week high.

Wall Street continues to mull Federal Reserve interest rate timing after a soft September jobs tally. Traders will get more Fed comments today, when San Francisco Fed President John Williams, a policy voter this year, gives a speech on the economic outlook at 5:30 p.m. Eastern. The market is torn. On one hand, the thought of an extensive rate-hike campaign brings potential risk that a Fed overshoot crimps business expansion. On the other hand, any further delay to a long-pledged return to “normal” interest rates could reflect Fed concern about the state of the global—and even the U.S.—economy. That’s not so encouraging to Wall Street, either. Let’s see if Williams offers further clarification on what might be expected at the Fed’s meeting later this month, or at its next gathering in December.

FIGURE 1: FIVE STRAIGHT.

A one-year view of the S&P 500 (SPX) charted on the thinkorswim® platform shows the broad average’s fifth straight higher close on Monday. The finish near 1987 was the highest since September 17. Data source: Standard & Poor’s. For illustrative purposes only. Past performance does not guarantee future results.

PepsiCo Beats. Alcoa’s (AA) Thursday release may be the unofficial earnings season launch but PepsiCo (PEP) is out with weaker yet Street-beating earnings already this morning. The soft drink and snack food concern said Q3 earnings dropped to $533 million, or $0.36 a share, from $2 billion, or $1.32 a share, in the year-ago period. On an adjusted basis, it earned $1.35 in the quarter, beating the Thomson Reuters analyst consensus for $1.26 a share. Revenue—the line item that Street analysts have said is most important across this earnings season—fell 5% to $16.33 billion from $17.22 billion last year, exceeding forecasts. For the full year, PepsiCo said it expects foreign-exchange translation to negatively impact core earnings per share by 11 percentage points. Shares rose in early trading.

OPEC Sees Crude Supply Cuts. Oil prices are set to rebound as steep cuts in global oil investments crimp supplies, OPEC’s head said in remarks Tuesday. Secretary-General Abdalla Salem el-Badri said there will be “less supply in the very near future. Less supply means high prices.” OPEC expects global investments in oil and gas projects to be reduced by just over 22% this year. At the same panel, Fatih Birol, head of the International Energy Agency, said he expects that expenditure will fall by 20% in 2015, “the highest drop in history.”

Microsoft's Big Moment? Microsoft (MSFT) hits New York today to display a full range of devices that run across its just-launched flagship operating system, Windows 10. According to financial press, MSFT will be showcasing two new versions of Lumia smartphones (featuring Continuum), an updated Surface Pro tablet, and the possibility of more details on its HoloLens reality headset. The company's first flagship store is slated to open in NYC on October 26.

Good trading,
JJ
@TDAJJKinahan

NC
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