Stocks Surge Ahead of Earnings Season, FOMC Minutes Offer Insight into Rate Hikes

Strategic Insights -

Stocks ended the week with strong gains, posting one of their best weekly performances of the year, as investors brace for the earnings season to pick up in earnest. Next week's earnings calendar is dominated by the banks, but will also include reports from high-flier Netflix (NFLX) and chip making giant Intel (INTC). The FOMC minutes for the September 16-17 policy meeting showed "many members" thought rate hike conditions had been met or would be met soon, but "several members" were worried that the downside risks to growth and inflation had increased.

Key Takeaways:

  • Stocks rose 3.72% in the Dow, 3.25% in the S&P 500, and 2.58% in the Nasdaq, posting one of their best weekly performances of the year.
  • Next week's earnings calendar is dominated by the banks, with reports from Netflix (NFLX) and Intel (INTC) also expected.
  • The FOMC minutes showed "many members" thought rate hike conditions had been met or would be met soon, but "several members" were worried about downside risks to growth and inflation.
  • Nelson Peltz's Trian Fund Management disclosed a $2.5B stake in General Electric (GE), predicting the stock may be worth $40-$45 per share by 2017.
  • DuPont (DD) gained after announcing the retirement of chairwoman and CEO Ellen Kullman, spurring investor hopes for an accelerated pace of change.
  • Freeport-McMoran (FCX) shares rose after the company added two Carl Icahn representatives to its board.
  • Polycom (PLCM) and Mitel (MITL) both gained after activist investor Elliott Management disclosed stakes in both companies and urged the two to consider a combination.
  • Twitter (TWTR) shares advanced after the company appointed co-founder and interim Chief Executive Jack Dorsey as permanent CEO.
  • Dell and private equity partner Silver Lake are in "advanced talks" to buy EMC (EMC) in a deal that could be worth more than $50B.

Statistics:

  • Stocks rose 3.72% in the Dow, 3.25% in the S&P 500, and 2.58% in the Nasdaq.
  • September Markit's services PMI dropped to 55.1, compared to 55.6 in the preliminary reading and 56.1 in August.
  • September ISM's services index dropped 2.1 points to 56.9.
  • Initial jobless claims dropped to 263,000 in the week ended October 3.
  • Import prices slid 0.1% in September.
  • Export prices declined 0.7% in September.
  • Wholesale inventories edged up 0.1% in August, while sales fell 1.0%.

Sources:

  • TheFlyOnTheWall.com via COMTEX
  • Markit's services PMI
  • ISM's services index
  • U.S. Department of Labor
  • The Wall Street Journal
  • CNBC
  • Re/code
  • Barron's
  • The New York Times
  • Morgan Stanley
  • Baird
  • Barclays
  • Alcoa (AA)
  • Dow Jones Industrials Average
  • S&P 500
  • Nasdaq Composite Index