EmailWith Alcoa's (AA) earnings release Tuesday after the close, the market has entered the third quarter reporting period.
Alcoa disappointed on the bottom line, but participants took that and the news that Slovakia rejected the new, expanded European Financial Stability Facility (EFSF) in stride. U.S. futures have rallied with foreign markets this morning, and currently point to a stronger open.
Earnings are expected to grow by 11.8% for S&P 500 companies in the third quarter, but that is down from 16.4% when the quarter began. Nearly half of the 4.6 percentage-point decline is due to lowered expectations in the financial sector. JPMorgan Chase (JPM) will be the first major financial company to report this quarter, releasing results Thursday before the open.
In the meantime, strong results from companies like PepsiCo (PEP) have been enough to offset Alcoa, which did beat on the top line. Both companies reiterated their full-year guidance.
Aside from earnings, Europe remains in focus.
Market participants managed to shrug off Slovakia's no vote on the EFSF because it included a no confidence vote in the Slovakian government. Prime Minister Radicova stepped down, and the opposition party, having achieved its result, has said it will now vote for expanding the EFSF.
If that is not enough political fluff for market participants, there were a number of political developments in the U.S. last night to digest. In addition to another Republican debate between presidential candidates, the U.S. Senate voted down President Obama’s jobs bill and approved the bill supporting tariffs against China due to currency manipulation.
The latter will probably due nothing more than upset the Chinese, as the House of Representatives is not expected to take up the bill.
Staying with China, the Shanghai Composite led gains in Asia overnight, rising 3%. Banks led the rally as Central Huijin, the domestic investment arm of China’s sovereign wealth fund, upped its stakes in the country's four largest banks.
European markets opened slightly lower this morning, but rallied from there, led by a 5% rebound in Greece.
Outside of equities, the dollar is trading broadly lower against the other major currencies. Treasuries are also lower ahead of today's 10-year Treasury Note auction. Yesterday's 3-year sale saw decent demand, as expected.
Today's calendar also contains the FOMC Minutes from the September 20 meeting (2:00 p.m. ET), which may provide some additional insight into the Federal Reserve's decision on "Operation Twist."
--David M. Campione, CFA
Dave is an analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.
