Major Indices Flat as the U.S. Dollar Soars

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U.S. equities drifted near the unchanged line Friday, recovering from deeper, early session losses to stay within the confines of an increasingly tight multi-month trading range.

For two weeks now, the market has oscillated around, but finished near, where it opened as volatility is squeezed out. Traders, it seems, are loath to make any big moves ahead of the election on Nov. 8.

In the end, the Dow Jones Industrial Average lost 0.1%, the S&P 500 lost a fraction, the Nasdaq Composite gained 0.3% and the Russell 2000 finished Friday with a 0.1% loss. Treasury bonds were mixed, the dollar was stronger (moving to its best level since February), gold was little changed and oil was slightly higher with a 0.4% gain.

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Consumer discretionary stocks led the way with a 0.8% gain, while telecom and healthcare underperformed with losses of 2.3% and 0.9%, respectively. Microsoft Corporation (NASDAQ:MSFT) surged 4.3% thanks to a top- and bottom-line beat with its cloud business gaining momentum.

PayPal Holdings Inc (NASDAQ:PYPL) gained 10.1% thanks to an in line earnings report on stronger earnings and solid guidance. And Time Warner Inc (NYSE:TWX) gained 7.8% on reports AT&T Inc. (NYSE:T), which dropped 3%, could be advanced talks to purchase the company noting a deal could be announced this weekend.

Advanced Micro Devices, Inc. (NASDAQ:AMD) suffered a 6.3% decline on weakness in its computer and graphics segment.

On the economic front, there was more hawkish commentary from Federal Reserve officials. This time, San Francisco Fed President Williams reiterated that he wanted gradual rate hikes sooner rather than later with the U.S. economy pretty much at full employment in his mind. He added that inflation is pretty near the Fed’s 2% target and should push higher in the next year or so.

With the Q3 earnings season about one-quarter done, FactSet notes that S&P 500 earnings are now expected to fall 0.3% from last year — which would be the fifth consecutive quarter of declining profits. Looking ahead to next week, energy majors including Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX) are up.

The sector has been by the far the single largest drag on profitability over the last year-and-a-half. When energy prices pushing into positive territory on a year-over-year basis, as we eclipse last year’s energy price selloff into the February lows, comparisons will get easier and profitability growth could very well return.

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The downside, of course, is that higher energy prices (while good for earnings) are set to juice the inflation rate hike, encourage the Fed to hike rates, and will further tap the brakes on an already tepid GDP growth rate. Currently, according to the Atlanta Fed, Q3 GDP growth is likely to clock in at just 2%.

Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/10/stock-market-today-nyse-dow-jones-industrial-average-investing-news-earnings-dollar-usd/.

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