U.S. Stocks Fluctuate Amid Earnings Reports Before Fed’s Fischer

  • Vice chair to speak on low rates amid debate on tightening
  • Equities alternate between gains and losses for 7th day

U.S. stocks fluctuated, as investors assessed corporate earnings before remarks from Federal Reserve Vice Chairman Stanley Fischer that may provide more insight on the path for borrowing costs.

Equities struggled for early direction, with Bank of America Corp. unable to sustain early gains following quarterly profits that beat estimates, following similar fades by JPMorgan Chase & Co. and Citigroup Inc. on Friday. Netflix Inc. sank 2.6 percent before its report today after markets close, and energy producers slipped as crude oil retreated below $50 a barrel. Hasbro Inc. jumped the most in 15 months after its results topped analyst forecasts.

The S&P 500 Index fell 0.1 percent to 2,130.65 at 11:22 a.m. in New York, after slipping 1 percent last week. The Dow Jones Industrial Average lost 22.42 points, or 0.1 percent, to 18,115.96. The Nasdaq Composite Index also decreased 0.1 percent. The CBOE Volatility Index rose 2.4 percent, on pace for the steepest monthly climb since August 2015. Trading in S&P 500 shares was 15 percent below the 30-day average for this time of day.

“My theme for the next couple of weeks is focus on earnings, but keep one eye on the dollar and interest rates,” said Mark Kepner, managing director and equity trader at Themis Trading LLC in Chatham, New Jersey. “The dollar keeps strengthening and that could have some effect on earnings.”

Stocks are alternating between daily gains and losses for a seventh session, as sentiment swings on everything from central-bank policy to the U.S. election and perceptions on the economy’s strength. Bank earnings also remain in focus, with Goldman Sachs Group Inc. and Morgan Stanley due to report this week. More than 80 members of the S&P 500 report earnings this week, including International Business Machines Corp., which joins Netflix later today.

While concerns about profitability made them the worst S&P 500 performers of 2016, lenders are staging a recovery, rising twice as much as the broader gauge in the third quarter. Analysts who estimated a profit decline of 2.6 percent at banks for the period as recently as Oct. 7 are now projecting an increase of 0.7 percent.

“I suspect there will be a few hits along the way, but it seems there is going to be some good news,” said Ben Kumar, London-based investment manager at Seven Investment Management LLP, which manages about 10 billion pounds ($12.2 billion). “Year to date, the banks index is still massively underperforming the S&P 500, but in the last three months, it’s really outperforming. This is investors realizing that in a rising-rate world, one of the beneficiaries are banks.”

Investors are seeking clues from data and Fed comments on the trajectory of monetary policy. A report today showed output at U.S. manufacturers rose for the third time in four months. Traders have boosted bets for a rate hike in December to almost 68 percent, from even odds on Sept. 27, and they’re pricing in a 17 percent chance of a move when officials meet early next month, before the Nov. 8 presidential election.

Fed Bank of Boston President Eric Rosengren said during an interview Saturday that the U.S. central bank is already running the economy hot enough to overshoot his estimate for the lowest sustainable level of unemployment and to reach its goal for 2 percent inflation. His comments followed a speech Friday in which Chair Janet Yellen said there are “plausible ways” that running the economy hot for a while could repair some damage caused to growth during the recession. Vice Chair Fischer is due to speak in the early afternoon.

The S&P 500 is on track for an October drop, a month that has yielded gains in five of the past six years. The benchmark is down 1.7 percent for the period so far after capping the first back-to-back weekly declines since August. It closed Friday 2.6 percent below a record last reached two months ago.

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