Tuesday, October 26, 2010

US Market Commentary (After Market Close): Flat Finish

Strength in the dollar overshadowed another batch of better-than-expected earnings this morning. While that left stocks to start the session in the red, the broader market was able to recover to the neutral line, where it was mired amid resistance.

The dollar rebounded solidly from its loss in the prior session, such that the Dollar Index settled 0.7% higher today. That move came in the face of a stronger British pound, which was helped by news that the United Kingdom's economic output for the third quarter hit a stronger-than-expected clip of 0.8%. Moreover, Standard & Poor's affirmed the UK's AAA credit rating.

With the dollar a primary catalyst for trade, the broader market was uninspired by the latest round of quarterly reports. The most recent lot included upside earnings surprises from Amgen (AMGN 57.26, -0.69), Biogen Idec (BIIB 59.99, +0.09), Bristol-Myers Squibb (BMY 26.86, -0.30), Johnson Controls (JCI 34.49, -0.25), and Texas Instruments (TXN 28.88, -0.10). Coach (COH 49.78, +5.30), National-Oilwell Varco (NOV 52.03, +4.06), and Ford Motor (F 14.36, +0.21) each posted better-than-expected earnings, too, but their shares set fresh 52-week highs.

IBM (IBM 140.67, +0.83) already reported its results for the latest quarter, but managed to attract support with its announcement that its board has authorized $10.0 billion for share repurchases.

Though moderate, a broadly positive response followed the midmorning release of the Consumer Confidence Index for October. It improved to 50.2 from 48.5, but had only been expected to improve to 49.0, according to economists polled by Briefing.com.

Despite positive data and generally upbeat corporate reports, the stock market never successfully staged an advance. Sellers kept the S&P 500 out of positive territory by standing ready at the neutral line.

Treasuries also had an unimpressive session. The benchmark 10-year Note fell 21 ticks so that its yield climbed to 2.64%. The 30-year Bond fell more than a full point so that its yield returned to the 4.00% mark.

Similar to the prior session, Treasuries extended their losses in the wake of the latest Note auction. Today's auction featured $35 billion of 2-year Notes that drew a bid-to-cover ratio of 3.43 on dollar demand of $120.1 billion and an indirect bidder participation rate of 40.0%. The 2-year Note ended the day down a couple of ticks so that its yield was last quoted at 0.39%.

Advancing Sectors: Consumer Discretionary (+0.4%), Energy (+0.3%), Tech (+0.1%), Telecom (+0.1%), Financials (+0.1%), Declining Sectors: Consumer Staples (-0.4%), Health Care (-0.3%), Industrials (-0.3%), Materials (-0.2%), Utilities (-0.2%)
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