Market Wrap-Up for October 16: The Week in Review

The hope is that investors like roller-coaster rides. This week once again proved that volatility is back with a vengeance as each day saw some hefty increases followed by declines in the major market indexes. The culprit was once again dour outlooks and less-than-stellar data coming from various economic reports.

Surprisingly, some traders viewed all of this negativity as signs that the Federal Reserve wouldn’t raise rates before the end of the year. That means that it will be game on and the flow of cheap money will continue to push stocks forward.

The week’s earnings reports, and there were a lot, had a mixed effect on the market. Each was digested in their own way and added or subtracted to the market’s roller coaster.

All in all, the fourth quarter is shaping up to be one of the most volatile we’ve had on record. That wild ride should continue.

While trading volumes were low on Monday thanks to the Columbus Day holiday, the markets managed to log their seventh days’ worth of gains in a row. Driving by bullish moves in consumer and health care stocks, the Dow reached its longest winning streak since December. Adding to the increases were gains in Chinese stocks on the back of new stimulus measures as well as major buy-out news in the tech sector. At the same time, declines in energy stocks helped keep the gains muted.

The Dow Jones Industrial Average gained 47.37 points to reach 17,131.86 while the S&P 500 and NASDAQ rose 2.57 points and 8.17 points, respectively.

• KMG Chemicals (KMG) was the lone dividend stock to report on the holiday trading session. KMG reported profits of 32 cents per share. That was below analyst estimates for the specialty chemicals manufacturer. KMG yields 0.6%.

Tuesday was light on economic data as well, with the only piece being the National Federation of Independent Business’ (NFIB) Small Business Index. The data showed a slight increase in sentiment. However, the markets were focused on earnings guidance and the previous day’s tech deals.

Sadly, investors and traders didn’t like what they saw. The Dow Jones Industrial Average declined 49.97 points while the S&P 500 fell 13.77 points. Also, the tech-heavy NASDAQ sank 42.03 points.

• Railroad CSX Corp. (CSX ) chuffed into earnings with a nice beat. CSX reported EPS of 50 cents per shares, 2 cents better than expectations. The transportation bellwether yields 2.6% and also reported mixed guidance.

• Things were also great for semiconductor and chip giant Intel (INTC ). INTC also reported an earnings beat at 64 cents per share in profits. Intel yields 2.9%.

• Health care stalwart Johnson & Johnson (JNJ ) also saw the earnings love. JNJ managed to beat earnings by 5 cents per share. However, it may need one of its namesake Band-Aids as the firm did report lower sales. JNJ yields 3.1%.

• JPMorgan Chase & Co. (JPM ) set the tone for the financial sector when it missed analyst estimates. The bank yields 2.94%.

• Kinder Morgan (KMI ) missed analyst estimates by 4 cents per share when it reported earnings. The midstream and pipeline giant reported earnings of just 15 cents per share and yields 6.3%.

Wednesday was all about the consumer as the day’s major economic data focused on retail. And the consumer isn’t doing that well. First, the Census Bureau released both core, which backs out automobiles, and regular retail sales figures for the previous month. Both metrics continued their downward trend, coming in at -0.3 and 0.1, respectively. Both were less than previous reports and analyst expectations. Also the Bureau of Labor Statistics’ Producer Price Index (PPI) came in lower. The measure of consumer inflation hit a negative 0.5 last month.

Adding to the consumer woes were retailer Wal-Mart’s (WMT ) downtrodden estimates about profits and consumer health.

All of this was enough to push the markets into a decline. The Dow Jones Industrial Average dropped 157.14 points to close below 17,000. The S&P 500 lost 9.45 points and the NASDAQ Composite fell 13.76.

• Following JPM’s lead, Bank of America Corp. (BAC ) reported earnings of 37 cents per share. That bested estimates and the bank yields 1.27%.

• Asset manager and iShares ETF sponsor BlackRock (BLK ) killed it on earnings. BLK reported a 42-cent beat on EPS of $5. BLK’s report showed that investors are using ETFs to pad BLKs bottom line as well as its 2.71% dividend.

• Delta Air Lines (DAL ) was flying the friendly skies with its earnings beat. DAL’s extra 3 cents per share was built on the back of lower fuel costs. DAL yields 1.1%.

• Wells Fargo (WFC ) only managed to beat estimates by 1 cent per share as questions about its loan portfolio margins came to the forefront. The money-center bank yields 2.8%.

Thursday was an important day for Federal Reserve watchers. Not because the central bank reported anything, but because some very key inflation data was presented. And it looks like the Fed might not raise rates before 2015 ends. The Bureau of Labor Statistics reported inflation data via the CPI and Core CPI measure. The regular CPI, which includes energy, came in at negative 0.2. This means that prices actually fell during the reporting time period. Core CPI showed a slight increase. However, neither of these two metrics puts us ahead of the Fed’s 2% target for the full year.

Also reported on Thursday were the Philly PMI and Empire State Manufacturing Indexes. Both showed declines in industrial activity. On the bright side, initial unemployment claims came in at 255,000, below the previous week’s report.

All of these things mean that the Fed doesn’t have any reason to raise rates based on its own set of criteria. Needless to say, the markets swooned. The Dow Jones Industrial Average jumped 217 points, while the broader S&P 500 gained 29.62 points. The NASDAQ also increased and rose by 87.25 points.

• Things aren’t as good for hedge fund and private equity managers as they were in the past. Just ask sector giant Blackstone (BX ). BX reported a 35-cent loss per share. That was more than analysts figured it would lose. Structured as an MLP, BX yields 2.7%.

• The last of the four major bank stocks, Citigroup (C ) announced much-needed and better-than-expected results. C reported profits of $1.31 per share and yields 0.4%.

• That sucking sound was the “Vampire Squid’s” trading profits imploding. Investment bank Goldman Sachs (GS ) saw a huge decline in earnings. GS reported EPS of just $2.90 and currently yields 1.4%.

Ending the week is the University of Michigan’s Preliminary Consumer Sentiment report. Analysts expect the metric to come in slightly better than previously forecast. However, with other consumer data this week trending lower, the UoM report could be a real stinker and spell trouble for the holiday shopping season.

Investors seem not to be worrying as the Dow is up slightly in pre-market trading, as is the S&P 500 and NASDAQ. That could change as two major sector bellwethers report before the bell on Friday.

• As it continues to strip back down into an industrial firm, General Electric (GE ) is once again a major measure of manufacturing might. GE is expected to report EPS of 26 cents per share and yields 3.28%

• Investors in transportation and railroad expert Kansas City Southern Liquid error: internal hope to yell “Choo Choo!” when the firm reports. The railroad is predicted to earn $1.22 per share and yields 1.34%

Going into next week, investors do get a break from all the economic data. The real concerns are a slug of housing-related metrics such as HPI, housing starts, and building permits, that are scattered throughout the week.

However, what is lacking in economic data is made up for in earnings. As earnings season rolls on there’s plenty of dividend-related companies reporting their third quarter EPS numbers. We’ll see reports from Halliburton (HAL ), Bank of New York Mellon (BK ), and Kimberly-Clark (KMB ), just to name a few.

All in all, the markets should ebb and flow based on the earnings and guidance for future earnings next week.

Disclosure: Author is Long KMI.