US Market Commentary(After Market Close): Weakness Overcome to Extend 2009 Highs

The major stock indices extended their 2009 highs late this session by overcoming losses that stemmed from a sell-the-news reaction to quarterly reports from Goldman Sachs and Citigroup.

The broader market spent most of the session with modest losses, which came amid considerable weakness in the financial sector. Financials were down as much as 1.7% following better-than-expected earnings from Goldman Sachs (GS 188.63, -3.65) and Citigroup (C 4.75, -0.25), both of which benefited in the previous session from an upbeat report from JPMorgan Chase (JPM 47.16, +0.00). However, the gains during the previous session effectively priced in this morning's positive surprise, prompting participants to sell the shares and take profits as the news hit.

Weakness in the financial sector weighed on the broader market for the entire session, but a late lift helped the sector pare its losses so that it finished with a loss of 0.7%.
The late lift was led by the energy sector, which settled with a 2.0% gain. That is more than twice the gain of the next best performing sector (utilities, +0.9%). Energy's advance came as refiners (+8.0%) surged and oil and gas equipment stocks (+3.4%) and oil and gas driller stocks (+3.2%) spiked with a sharp rise by oil prices. News that weekly oil inventories increased by a smaller-than-expected 334,000 barrels helped send oil futures prices to new 2009 highs of $77.97 per barrel. Oil prices settled at $77.58 per barrel with a 3.2% gain.

Energy's strength helped the broader market finish at session highs, which extended the gains made in the previous session. The broader market is now up more than 21% year-to-date. Despite that accomplishment, the S&P 500 is just now at levels first seen in 1998.

Market participants were generally unfazed by the latest batch of economic data, which featured a 0.2% increase in consumer prices and core consumer prices for September. The consensus called for a 0.2% increase in CPI and a 0.1% increase in core CPI. Initial jobless claims for the week ending October 10 totaled 514,000, which was a bit below the consensus forecast of 520,000 initial claims and down 10,000 from the previous week. Continuing claims slipped below 6.0 million for the first time since March by coming in at 5.99 million. The consensus called for an even 6.00 million continuing claims.

The Empire State Manufacturing Index for October came in at 34.57, which topped the 17.25 that was widely expected, while the Philadelphia Fed Index for October came in at 11.5, which is fractionally below the 12.0 reading that was expected. Still, the Philly Fed Index has showed three straight positive readings, which hasn't happened four roughly two years.