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Bob Carey
Chief Market Strategist
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  US Stocks Ended Oct. 14, 2016
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Stocks sold-off as a slew of disappointing earnings reports damped optimism for a rebound in third-quarter profits. In addition to a weak start to earnings season, a higher likelihood of a Fed rate increase also led investors to sell riskier assets. Fed fund futures, contracts that investors use to speculate on interest rate movements, indicate there is a 64% chance of a December rate hike, up from 59% at the beginning of the month. Economic data for the week mostly supported the case for a December rate hike, as retail sales advanced by 0.6% in September, the best reading in the last 3 months, while wholesaler prices increased by more than expected. Alcoa Inc. unofficially kicked off earnings season on Tuesday with disappointing results within the downstream business, which is soon to be spun-off, causing the material name to fall by the most in seven years. Fastenal Co., one of the largest industrial distributors, did not fare much better as shares fell nearly 10% for the week. Management noted in the earnings call that they have yet to see the industrial economy bottoming. Illumina Inc. lost over 20% of its value for the week after pre-announcing disappointing revenue guidance for the company's genetic-sequencing machines. JP Morgan Chase & Co. and Citigroup Inc. reported better-than-expected results as fixed-income, currency, and commodities trading benefited from higher volatility. John Stumpf resigned from his role as chief executive officer for Wells Fargo & Co. amid the public outcry over fake accounts being opened. Looking ahead to earnings season, S&P 500 earnings are expected to slip for the sixth consecutive quarter. Superior stock selection will remain key as underlying fundamentals of many corporations diverge.
Posted on Monday, October 17, 2016 @ 9:00 AM • Post Link Share: 
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These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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