Stock Market Outlook – After The Close Comments for Oct 6 2016

At one point this morning the Dow was down 118 points and the S&P was at 2150.28, testing the 2150 level once again.

For the S&P the 2150 level has become a rather important indicator. It has been retested numerous times over the summer and now into the fall.

The low in the S&P occurred today around 11:00 AM. Then a rise in oil prices seemed to draw in investors who picked up shares and moved the S&P up to the 2160 level. The remainder of the day the S&P drifted sideways but at the close managed a slight gain to close up 1.04 points to 2160.77 or essentially flat ahead of the jobs numbers on Friday.

Sept Jobs Numbers

The jobs numbers for September are expected to show continued growth but a slightly slowing trend as the market is nearing what is considered to be “full employment”. It is hard to judge what the market direction will be once the jobs numbers are released as higher than expected jobs numbers could mean the Fed will raise rates in November rather than December. Although any rate increase before December seems highly unlikely due to the elections in November, sometimes it’s what you least expect that hits the hardest.

A lower than expected jobs numbers means the Fed may have room to keep interest rates at present levels for longer than expected.

Twitter Down 20%

With news that Walt Disney, Alphabet and Apple have no plans to acquire Twitter, the stock fell fast today plunging 20% to close at $19.87.  With no earnings to speak of and unable to grow revenue from its existing customer base, Twitter seems at odds with what to do next. The only remaining rumored company interested in a potential acquisition is Salesforce. We should hear more on Twitter shortly.

American Express Stock Down 3.76%

One company that is making money but just not enough is American Express. They trade at just 11.3 times price to earnings and have one of the highest ROE’s in the consumer Financial Services Industry but with Nomura issuing a bearish outlook on the stock cutting their target to $56 which is below today’s closing price of $61.94, the stock is under heavy selling pressure.

American Express was trading around the $51 level in February of this year so this is quite a bearish call. Ever since Costco stopped their association with American Express, the company has had trouble growing their customer base and perception among investors is more bearish than bullish. There is some support in the stock down at the $57.50 level which is 7% below where the stock is currently trading.

Oil Higher Again

With Oil back above $50 (WTI) a barrel, more and more analysts are moving to the bullish side for the commodity. If oil does continue to rise it will move the inflation expectations higher, which is one of the reasons the financial stocks are continuing to climb.

Wells Fargo Stock (WFC) Above $45

One stock that is up again today was Wells Fargo Stock as it closed above $45 after reaching a low of $43.55 on Oct 4. just two days ago. This could be a rebound but I am watching carefully as I have a string of naked calls on the stock from Oct 7 expiry through to Oct 28.

Walmart Stock Down 3.22%

The world’s biggets retailer, Walmart stock fell to $69.36 today breaking through the $70 support level on the project outlook from the company. Sales are expected to be flat in 2017 and grow by 5% in 2018. Meanwhile the company plans to place far more emphasis on its e-commerce and will slow opening of new stores.

Investors’ Focus

The stock market continues to show signs of wanting to push higher. With earnings next week we could see even a poor employment report brushed aside as investors focus, once the employment number releases, will be turned to next weeks earnings report which start Oct 11 with Alcoa reporting. So far, two of the companies I watch prior to Alcoa’s quarterly numbers have been on opposite sides. Nike reported stellar results despite the stock falling as investors worry about growing competition for Nike. On the other side was YUM Brands which yesterday after the close missed both revenue and earnings estimates by just a small margin,  but it was still a miss. Yum Stock fell to $76.50 today but closed at $87.44, down 1.33% on the day. Considering the stock was trading just below $65 in February, it has had a very nice gain this year.

This evening investors will stay focused on tomorrow’s jobs numbers. That will be the next deciding factor of where the stock market will swing next. Presently stocks remain stuck in a tight trading range. That could end shortly.

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