Before the Bell - The U.S. stock market declined sharply yesterday, as investors worried about inflationary pressures and the debt ceiling debate taking place in Washington. As has been the case lately, traders continued to exit the volatile technology names, while rotating capital into commodity and energy stocks. Overseas, the markets have been trading in a mixed fashion. In Asia, the Nikkei lost considerable ground. In Europe, the FTSE 100 has been advancing nicely. Meanwhile, the U.S. equity futures are pointing upward, which implies a positive start to the trading day.
In economic news, there are a few important reports to watch today. Specifically, we get a look the nation’s trade balance for the month of August. In addition, the ISM (Institute for Supply Management) Non-Manufacturing Index for the month of September will be released. These items will be closely followed, as they provide key information about the broader economy. However, the big news will take place at the end of the week. Specifically, on Friday before the market opens, the government will deliver the employment report for the month of September. Many of Wall Street consider this a key issuance, as it is closely followed by the Federal Reserve and may well be utilized when setting monetary policy. The central bank has indicated that it plans to gradually tighten its stance, but the timing remains uncertain.
In the corporate arena, a relatively small number of profit reports are due out this week. This morning, Pepsi Co. (PEP) weighed in with a respectable set of numbers and provided upbeat guidance. On Wednesday, Constellation Brands (STZ), a leading alcoholic beverage manufacturer, will deliver its results. Looking ahead, the third quarter has now concluded, and the earnings season will commence next week. Some of the largest banks and financial corporations, including JPMorgan Chase (JPM) and Wells Fargo (WFC), will be among the first names reporting.
Technically, the stock market encountered significant selling over the past few weeks. The S&P 500 Index is now sitting well below its 50-day moving average, located around the 4,440 level. The bulls attempted to push stocks back above this key area a few days ago, but that effort failed to materialize. Clearly, traders have a lot of information to concentrate on. No doubt, the third-quarter earnings season will likely be a main area of focus. – Adam Rosner