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Stock Market News for October 12, 2015

Benchmarks ended in the green on Friday following the Fed minutes that restated the no lift-off decision in September. However, reduced rate hike fear in October had a negative impact on financial stocks. Moreover, weak third quarter earnings results from Alcoa raised concerns about the earnings performance in the third quarter. Meanwhile, major benchmarks finished in positive territory for the second-straight week with the Dow and S&P 500 posting their best weekly performances since February and December, respectively.

For a look at the issues currently facing the markets, make sure to read today's Ahead of Wall Street article

The Dow Jones Industrial Average (DJI) rose 0.2% to close at 17,084.49. The Standard & Poor's 500 (S&P 500) gained nearly 0.1% to close at 2,014.89. The tech-laden Nasdaq Composite Index closed at 4,830.47, rising 0.4%. The fear-gauge CBOE Volatility Index (VIX) declined 2% to settle at 17.08. A total of around 6.77 billion shares were traded on Friday, significantly lower than the last 20-sessions' average of 7.52 billion. Advancers outpaced declining stocks on the NYSE. For 55% stocks that advanced, 42% declined.

Investors continued to cheer the dovish views in the minutes of the Federal Reserve's September policy meeting. The Fed indicated that volatility in financial markets and concerns about China's economic slowdown restricted them from lifting key interest rates from near zero level. Moreover, the Fed staffs believe that inflation, which is one of the major economic indicators to decide on rate hike, will not hit the 2% goal even by the end of 2018.

The Fed said: "Participants anticipated that recent global developments would likely put further downward pressure on inflation in the near term; compared with their previous forecasts, more now saw the risks to inflation as tilted to the downside." Though an October hike is still on cards, many of market participants anticipated that the Fed may not opt for a rate hike this year.

Meanwhile, William Dudley, president of Federal Reserve Bank of New York, was concerned about the US economic health in the second half of the year and is less confident about a rate hike this year. He said: "I think the key question is, are we going to get sufficient growth in the economy, put downward pressure on the unemployment rate, get an acceleration in wages?" He added that though a rate hike in October is still possible, "but it's a forecast and we're going to get a lot of data between now and December, so it's not a commitment."

Also, Charles Evans, Chicago Fed President, supports a lift-off later than what other policy makers are planning. He is emphasizing on "the path the funds rate will follow over the entire policy normalization process" than "precise timing for first increase." However, Atlanta Fed President Dennis Lockhart indicated that the Fed may raise interest rate this year despite several economic concerns.

Reduced possibility of a rate hike in October had a negative impact on financial stocks on Friday. The Financial Select Sector SPDR (XLF) declined more than 0.6% and was one of the biggest decliners among the S&P 500 sectors. Key stocks from the sector including The Goldman Sachs Group, Inc. ( GS ), Morgan Stanley ( MS ), Bank of America Corporation ( BAC ), KeyCorp ( KEY ) and BB&T Corporation ( BBT ) lost 1%, 0.8%, 1.1%, 2.1% and 1%, respectively.

However, the Health Care Select Sector SPDR (XLV) gained nearly 0.5% and was the best performer among the S&P 500 sectors. Key healthcare stocks including UnitedHealth Group Incorporated ( UNH ), Regeneron Pharmaceuticals, Inc. ( REGN ), Bristol-Myers Squibb Company ( BMY ), Medtronic plc ( MDT ) and Abbott Laboratories ( ABT ) gained 2.8%, 2.6%, 1.5%, 0.8% and 1.8%, respectively.

Separately, shares of Alcoa Inc. ( AA ) plunged 6.8% after reporting third quarter adjusted earnings per share of 7 cents per share, down from the year-ago quarter's 31 cents per share. Earnings fell well short of the Zacks Consensus Estimate of 14 cents, marking the second straight quarterly miss. Revenues declined roughly 11% to $5,573 million in the third quarter, missing the Zacks Consensus Estimate of $5,670 million. Macroeconomic headwinds, which also include slowdown in Chinese economy, hampered the company's earnings performance. Alcoa was the worst performer among the S&P 500 companies on Friday.

Moreover, The Gap, Inc.'s ( GPS ) shares dropped 5.3% after posting a 1% decline in September's comparable-store sales (comps) against flat comps reported in the prior-year period. The apparel retailing giant's downfall in September is due to double-digit decline in comps at its Banana Republic brand and negative foreign currency impact.

Over the week, the Dow, S&P 500 and Nasdaq gained 3.7%, 3.3% and 2.6%, respectively.

Reduced rate hike fears and a strong rebound in energy shares boosted major benchmarks to register solid gains last week. Disappointing economic data including weak job additions in September and bigger-than-expected decline in ISM Services Index reduced concerns about a rate hike in October. Moreover, a similar stance in the minutes of the Federal Reserve's September policy meeting also had a positive impact on investor. Also, better-than-anticipated initial claims figure boosted investor sentiment.

Moreover, a strong rebound in oil prices boosted energy shares over the week. The Energy Select Sector SPDR (XLE) surged nearly 8% last week and was the biggest weekly gainer among the S&P 500 sectors. Russia's willingness to meet major oil producers to discuss the present oil market scenario and a rally in U.S. gasoline prices had a positive impact on global oil prices.

Meanwhile, a strong recovery in biotech shares after getting hampered by heavy selling on Tuesday also helped markets to end in the green. However, slump in Yum! Brands, Inc.'s ( YUM ) shares following lower-than-expected earnings results and Alcoa's disappointing third quarter earnings performance increased concerns about third quarter earnings results.

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


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

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