Oct 31 2008
Stock Market Midday Update: October 31, 2008 Looking For A Strong Week
Stocks are trading with healthy gains after opening the session in negative territory. Only defensive-oriented sectors exhibited resilience early on, but now seven of the 10 economic sectors are showing gains.
Should the stock market end the session higher, it would be the first back-to-back advance in over one month. Currently, the S&P 500 is poised to conclude the week 10.0% higher, though it is facing a loss of 17% for October.
Market participants received another dose of economic data this morning. The core PCE deflator was up 0.2%. Total PCE deflator was up 0.1%, as energy prices dipped. The numbers are likely to be lower in upcoming months. Additionally, the third quarter employment cost index provided good news from an inflation standpoint. With a softer labor market, there is reason to expect the favorable trend to persist in the fourth quarter.
September personal income and spending numbers were down 0.3%, which was not surprising after yesterday’s advance third quarter GDP release. Despite indications of softer consumer spending, retailers are outperforming the broader market. They are currently up 2.7% this session. Retailers are likely to benefit from lower oil prices as fewer dollars at the fuel pump means more money for discretionary purchases.
A stronger dollar is helping put pressure on oil prices. The greenback is up an impressive 1.7% this session, when measured against a basket of foreign currencies. The U.S. dollar is up 12.1% year-to-date.
The dollar’s recent strength is owed to international investors seeking safety from economic turmoil. Such turmoil has prompted central banks across the globe to cut interest rates. Most recently, Japan’s central bank announced a key overnight lending rate target cut to 0.3% from 0.5%.
Crude prices are down 2.5% midsession. The commodity most recently traded hands for little more than $64 per barrel.
Crude oil prices hit an all-time high of $147 per barrel in the third quarter, helping Chevron (CVX 73.85, -0.33) more than double its net income. The company posted better-than-expected third quarter results.
Elsewhere in corporate news, Yahoo! (YHOO 13.12, +0.19) may be barred from reaching a search deal with Google (GOOG 357.83, -1.86), given regulators’ trust concerns.
The financial sector (+2.7%) has emerged as a leader, after trailing in recent sessions. Barclays (BCS 10.91, -2.70) is a laggard, though, after disclosing it received a nearly $12 billion capital infusion from a group of investors from the Middle East, according to reports.
