Morning MoneyBeat is the Journal’s pre-market primer packed with market updates, insights and must-read news links. Send us tips, suggestions and complaints: steven.russolillo@wsj.com
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MARKET SNAP: At 6:05 a.m. ET, S&P 500 futures up 0.46%. 10-Year Treasury yield up slightly at 2.20%. Nymex up 47 cents at $82.39. Gold 0.40% higher at $1249.70. In Europe, FTSE 100 up 0.89%, DAX up 1.44% and CAC 40 up 1.85%. In Asia, Nikkei 225 down 2.03% and Hang Seng up 0.08%.
WATCH FOR: September Existing Home Sales (10:00 a.m. Eastern Time): seen +1.0% at 5.1 million; previously -1.8% at 5.05 million. ACE, Apollo Education, Brinker, Broadcom (BRCM), Coca-Cola (KO), Discover, E*Trade, Harley-Davidson (HOG), Illinois Tool Works (ITW), Interactive Brokers, Intuitive Surgical, Kimberly-Clark (KMB), Lexmark (LXK), Lockheed Martin (LMT), Manpower (MAN), McDonald's (MCD), Omnicom (OMC), Regions Financial (RF), Reynolds American (RAI), Six Flags Entertainment, Travelers, United Technologies Verizon Communications (VZ), VMware, Whirlpool (WHR) and Yahoo (YHOO) are among companies scheduled to report quarterly results.
THE BREAKFAST BRIEFINGWhen stocks were tumbling last week, the S&P 500′s 200-day moving average generated a fair amount of attention. Now that the market has rebounded, this chart level is once again in focus; this time for positive reasons.
Stocks rallied again on Monday, with the S&P 500 jumping back above 1900 and finishing at 1904, just two points below its 200-day average (1906). To chart watchers, the market's next move will suggest the recent rebound in stocks has legs, or it will prove to be just a dead-cat bounce that will lead to more downside ahead.
As a refresher, technical analysts use the 200-day moving average as a guide to the market's trend. When the S&P 500 starts trading below this level, the market is viewed as entering a longer-term downtrend; when it's above, the market is seen as being in an uptrend.
The S&P 500 went almost two years trading above this technical marker, one of the longest streaks on record, before tumbling below it last week. That move generated a bit of trepidation, prompting many market watchers to call for tougher times ahead.
But the selloff hit its low point on Wednesday, when the S&P 500 lost more than 3% at the day’s lows before cutting much of its losses by the end of the session. It then rallied Thursday, Friday and yesterday, with many chart watchers now looking for a close above the 200-day to validate the latest move.
"We are still in the early stages of what could be a bottoming pattern," said Jeffrey Saut, chief investment strategist at Raymond James. "Friday’s high in the S&P 500 was stopped practically right at the 200-day moving average and that appears to be the first resistance level in the way of higher prices. If we cannot overcome the 200-day soon, then we could fall right back toward the lows of last week."
The last part of Mr. Saut's quote is key. Technical analysts keep close tabs on momentum trends to judge the market's next move. Rising above the 200-day would be seen as a sign that the recent positive momentum in the market isn't a fluke. Conversely, failing to cross back above the 200-day would suggest the market has more downside ahead before it embarks on a renewed uptrend.
The S&P 500 has rallied 2.2% over the past three days, its biggest three-day winning streak since April. Still, the index remains down 3.5% for the month and is up about 3% for the year.
Some investors remain skeptical that the worst of the selloff is over.
"We came into last week looking for a tradable rally," Jonathan Krinsky, chief market technician at MKM Partners, wrote to clients on Monday. "While that low may very well stand, in our view the game has changed sufficiently enough that the v-shaped rebound we have become accustomed to over the last two years is unlikely to occur this time around."
But others are taking a more optimistic view to the market's next move.
"Over the next week or two, the calendar starts to turn more supportive," said Jason Trennert of Strategas Research Partners. "The 200-day moving average is at 1906 and is likely to provide the first real test followed by the 50-day near 1965."
Morning MoneyBeat Daily Factoid: On this date in 1879, Thomas Edison invented a commercially viable electric light bulb. In a Menlo Park, N.J. laboratory, the first test of the light bulb lasted 13.5 hours.
-By Steven Russolillo; follow him on Twitter @srussolillo.
UPDATE: The S&P 500 is up about 3% for the year. An earlier version of this article incorrectly stated the S&P 500 was down about 3% for the year.
STOCKS TO WATCHCoca-Cola is expected to report third-quarter earnings of 53 cents a share, according to a consensus survey by FactSet. Investors will be watching to see if the success the company has had with its "Share a Coke" marketing campaign, where cans of Coke, Diet Coke and Coke Zero are labeled with individual names like Sarah and John, can help revitalize flagging domestic sales.
Hot Electric Utility Companies To Own In Right Now
McDonald's is projected to report third-quarter earnings of $1.37 a share, down from $1.52 a share in the same period a year ago. The estimate has fallen sharply since the end of the second quarter, when analysts were projecting per-share earnings of $1.61, according to FactSet. The company missed earnings expectations for the last two quarters.
Verizon Communications is forecast to report third-quarter earnings of 90 cents a share.
On Monday night, Apple (AAPL) posted fiscal fourth-quarter earnings of $1.42 on revenue of $42.12 billion. Analysts expected Apple to report $1.30 a share on revenue of $40 billion, according to analysts surveyed by FactSet. Sales of iPhones hit 39.3 million for the quarter.
MUST READS (LINKS)CEO of French Oil Giant Total (FP.FR) Dies in Moscow Plane Crash: “French oil company Total SA said Chairman and Chief Executive Christophe de Margerie died Monday in a plane crash at a Russian airport.”
China Growth Slowest in Five Years: “China's economy grew at its slowest pace for five years in the third quarter, suggesting the government's targeted easing measures to boost economic growth haven't yielded expected results.”
SEC Steers More Trials to Judges It Appoints: “The Securities and Exchange Commission is increasingly steering cases to hearings in front of the agency's appointed administrative judges, who found in its favor in every verdict for the 12 months through September, rather than taking them to federal court.”
Fed to Banks: Shape Up or Risk Breakup: “Federal Reserve officials told bank executives they must do more to curb excessive risk-taking and improve behavior at their firms or face stiff repercussions, including being broken into smaller pieces.”
IBM’s Woes Point to a Fresh Overhaul: “BM, two decades after successfully shifting its emphasis to software and computer services from hardware, is showing signs of needing another overhaul.”
Heard on the Street: IBM (IBM), Free But Not Easy: “IBM has more flexibility having dropped its earnings target, but investors betting on quick progress from here are likely to be disappointed.”
IPhone 6 Recharges Apple’s Growth: “A year ago, the story line around Apple Inc. was that its formidable growth had petered out and Samsung Electronics Co. was eating its lunch. What a difference a year makes.”
Heard on the Street: Apple’s Big Screen Shot: “Apple's latest results showcased the company's ability to continue upselling customers on its newest products, even as it boosted its gross margin.”
Sears Seeks New Cash: “Sears is again turning to billionaire CEO Edward Lampert for funds, as the struggling retailer shores up its balance sheet ahead of the holiday season and seeks to reassure vendors worried about its health.”
CVS Plays Hardball With Rivals: “CVS is offering a prescription-drug plan that charges patients more if they buy their medications at pharmacies that sell tobacco products, a plan that could benefit the company's own network of drugstores.”
Bargains Are Found in Russian Markets: “Investors are hunting for bargains in Russia's battered financial markets, in a bet the country can ride out the pain of Western sanctions and plunging oil prices.”
Ahead of the Tape: Verizon’s Bright Horizon: “Strong growth in postpaid wireless customers is giving some pep to Verizon Communications.”
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