Markets Grind Higher in Front of FOMC Meeting

By Minyanville Staff,

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The S&P 500 (INDEXSP:.INX) grinded to new highs again today. Telecom stocks were in the lead, gaining 1.7% as a sector. Financial, utility, and energy stocks lagged.

Japanese stocks failed to string together two straight days of gains despite better economic data. Japan's September jobless rate fell to 4.0% from 4.1% in the prior month as expected, and retail sales grew on a year-over-year basis. The Nikkei (INDEXNIKKEI:NI225) finished down 0.49%.

Deutsche Bank ( DB ) and UBS ( UBS ) both reported worse-than-expected earnings. Deutsche Bank, the largest currency trader in Europe, saw slowdowns in its currency and fixed income trading businesses. The bank also had to set aside a larger portion of its earnings as litigation reserves for its involvement in rigging LIBOR rates. Although both banks opened down more than 3%, by the end of the day, they finished positive.

The government caught up with a backlog of economic data reports from September. Producer prices in September fell to a year-over-year rate of 0.3% from 1.4% in the prior month. Economists had estimated the rate would fall to 0.6%. The drop was largely due to a fall in food and consumer nondurable prices. September retail sales fell 0.1% from the prior month, below the economist estimate of unchanged growth. The report was impacted by the previously reported decline in auto sales and a sharp drop in department store sales. Positive gains were seen in restaurant and food sales.

The October survey of consumer confidence by the Conference Board fell to 71.2 from 80.2 last month. The large drop from the prior month was due to a sharp decrease in economic expectations for the near future.

IBM ( IBM ) announced that it may buy back up to an additional $15 billion of shares through 2014. The company's current buyback authorization has an additional $5.6 billion remaining.

LinkedIn ( LNKD ) reported third-quarter revenues and earnings that were well ahead of consensus estimates, but its fourth-quarter guidance was slightly weak, sending the stock modestly lower in extended trading.

Tomorrow's Financial Outlook

Tomorrow's trading activity will be dominated by the Federal Reserve's monthly monetary policy statement. It is unlikely that the FOMC will make any major moves. At its September meeting the FOMC decided not to reduce its asset purchases due to growing uncertainty over the government's handling of the debt ceiling and government shutdown. Because economic data reports have been delayed due to the shutdown, and those that have been released have shown worsening economic activity, it is unlikely that the Fed will be pushed into taking any action.

The ADP's October private payroll report will be released in the pre-market. Because the October non-farm payrolls report was pushed back until next Wednesday, the ADP report will garner more attention than normal. Also scheduled is the September consumer price index.

European economic data releases should have an impact on early trading. Spain will release its advance estimate of 3Q GDP, Germany will release employment figures and CPI, and the eurozone will release its economic confidence survey for October.

Fifty-one major US companies will report earnings tomorrow. Notable reports include Comcast ( CMCSA ), Sprint (S), Kraft Foods (KRFT), Metlife (MET), Facebook (FB), Visa (V), and Starbucks (SBUX).

Twitter: @Minyanville

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Stocks
Referenced Stocks: CMCSA , DB , IBM , LNKD , UBS

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