Market Perspective for October 10, 2016

Stocks rallied on Monday and recovered most of last week’s losses. Reports that Russia would join an OPEC production freeze sent oil prices firmly above $50 per barrel, lifting steel, coal and chemical shares. The technology and energy sectors hit new 52-week highs on Monday. Some financial subsectors hit 2016 highs and a new 52-week high could follow as soon as this week.

The August Job Openings the Labor Turnover Survey (JOLTS) will be released on Wednesday. Economists expect it will show 5.7 million job openings. Analysts are forecasting 254,000 initial claims on Thursday’s weekly unemployment report and September retail sales figures and the producer price index will be out on Friday. Economists forecast a big jump in retail sales last month, 0.7 percent from the month prior, and 0.5 percent ex-autos. The producer price index is expected to have climbed 0.2 percent in September. Federal Reserve Chair Janet Yellen is scheduled to deliver a speech on Friday concerning macroeconomic research.

Overseas, China’s trade figures for September will be out on Wednesday night, followed by inflation data on Thursday. New loans and money supply are also due this week. Chinese mortgage lending has soared in 2016 and has lifted commodity prices this year.

Earnings season kicks off this week with Alcoa (AA) on Tuesday. Although the firm is no longer in the Dow Jones Industrial Average, it remains a bellwether for the commodities and industrial sectors. Analysts forecast 12 cents per share in earnings. Industrial firm Fastenal (FAST) will also report on Tuesday. Delta Air Lines (DAL) and Taiwan Semiconductor (TSM) will deliver earnings reports on Thursday.  DAL is a component in the transportation index as well as a major airline stock. Analysts are looking for $1.65 in earnings per share. TSM is the largest component by far in the iShares MSCI Taiwan ETF (EWT) and it is also a top-10 holding in iShares PHLX Semiconductor (SOXX).

Citigroup (C), J.P. Morgan (JPM) and Wells Fargo (WFC) will report earnings on Friday. Analysts forecast earnings per share of $1.16, $1.39 and $1.01 respectively. Ongoing scandal at Wells Fargo may impact quarterly data and guidance. Fidelity Select Financials (FIDSX), Banking (FSRBX) and iShares US Financials (IYF) will be the most affected by this week’s reports and strong lending growth will benefit regional bank funds such as SPDR S&P Regional Banking (KRE).

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