Before the Bell - The U.S. stock market lost ground yesterday, as investors took a defensive stance ahead of the third-quarter earnings season. Most of the major equity sectors retreated, except for the energy and basic materials stocks. Of note, crude oil prices edged up to around $80 a barrel, suggesting that commodities traders anticipate inflationary pressures to persist. Investors also worried that in the current climate the Federal Reserve will be compelled to take some action. The yield on the government 10-year Treasury bond recently climbed to 1.61%, which is the highest level reached over the past few months. Overnight, the international markets have been encountering some challenges. In Asia, the Nikkei declined sharply. In Europe, the FTSE 100 has been under pressure, as well. Meanwhile, the U.S. equity futures are up modestly, which suggests a positive start to today’s session.
In economic news, there are no major economic reports scheduled for today. However, the pace should pick up over the next few days. Tomorrow, we get a look at the Consumer Price Index (CPI) for the month of September. In addition, the FOMC will release the minutes from its latest meeting. On Thursday, the Producer Price Index (PPI) will be reported, along with a number of other items. These reports will likely be closely followed by Wall Street, given the current concerns about inflation and the central bank’s monetary policy. For some perspective, the Federal Reserve has indicated that it plans to curtail its asset purchase program and eventually lift interest rates. However, the timing is not certain.
In the corporate arena, the third-quarter earnings season is set to commence. The large banks and financial institutions will be the first to report. On Wednesday, JPMorgan Chase (JPM) and BlackRock (BLK) will weigh in with their numbers. Throughout the earnings season, investors will be closely reviewing the latest corporate results and the commentary being offered to see if profits are being hampered by rising costs and supply-chain disruptions. The outlook for the remainder of the year will be a major topic.
Technically, the stock market has been quite volatile lately. A few days ago, the S&P 500 Index attempted to move beyond its 50-day moving average, located around the 4,440 level. However, that move did not materialize and further selling ensued. At this point, it remains to be seen if the bulls can regroup and take back control over the market. The upcoming earnings season may well provide some much needed direction. – Adam Rosner