MarketView for October 7

Summary

It really amounted to a fairly uneventful day on Wall Street, although both the Standard & Poor's 500 and Nasdaq indexes did manage a small gain as the Street waited for the quarterly earnings season to begin in earnest. The mild move followed two days of strong gains for the market, helped by optimism about third-quarter profits.

After the close, Alcoa released its results, marking the onset of major earnings announcements. Alcoa's shares rose 2.2 percent to $14.20 during the regular session. Expectations for the quarter have been high following the second quarter's strong showing, where more than 70 percent of companies exceeded consensus estimates. Costco Wholesale rose 1.9 percent to $59 during the session Wednesday after the retailer posted profits that topped expectations.

Stocks also responded well to a successful 10-year Treasury note auction, which raised confidence in U.S. assets, including stocks and bonds.

On the Nasdaq, Verisk Analytics rose 23.7 percent to $27.22 in its trading debut on Wednesday, a day after it raised $1.88 billion in the largest initial public offering since March 2008. Google was among Nasdaq's top performers, up 3.8 percent at $517.82 after the company's chief executive said the worst of the advertising recession was over.

Declining shares included telecommunications companies. The Federal Communications Commission chairman praised moves by top wireless companies to open their networks. Shares Monsanto fell, 1.4 percent to $74.33, after it reported a fourth-quarter loss that widened from the prior year.

Alcoa Kicks Off Earnings Season with Surprise Profit

Alcoa surprised the Street by announcing its first profit in a year after the close of regular trading on Wednesday. The black ink was due primarily to a combination of both cost savings and an increase in aluminum prices.

Third-quarter net earnings were $77 million, or 8 cents per share, compared with earnings of $268 million, or 33 cents per share in the same quarter of 2008, the company said. If you exclude restructuring and one-time items, earnings were $39 million, or 4 cents per share.

However, revenues were to $4.6 billion, down from the $7.00 billion the company posted a year ago. Nonetheless, it was still 9 percent higher than the second quarter.

The economic downturn since September 2008 has affected most of Alcoa's end markets -- automotive, commercial transportation, building and construction, and aerospace. Yet, in July, CEO Klaus Kleinfeld said there were signs that weak aluminum demand that resulted in production cuts and falling metals prices in the past year, might be easing. During the third quarter, the price of aluminum rose 16 percent to $1,890 per metric ton.

Gold Hits Record High

Gold set record highs for a second straight session on Wednesday on fears the dollar may weaken further, bringing on inflation. Gold bullion is up nearly 20 percent this year, helped by dollar weakness and inflation worries after central banks and governments across the globe poured billions of dollars into the financial system to revive growth. Spot gold hit a historic price of $1,048.20 per ounce.

COMEX gold for December delivery closed up $4.70 to $1,044.40 an ounce, after dealing in a session range of between $1,037.80 and $1,049.70, a new all-time record high.

Other precious metals were also higher with palladium hitting $313.50 an ounce, its highest level since August 2008. Platinum rose to a two-week high and silver to a three-week high.

The dollar swung into positive territory, clipping gold's gains along with technical resistance at $1,050 per ounce. Still, analysts said momentum should remain in the market's favor.

Crude Down

Sweet domestic crude for November delivery settled down 1.9 percent or $1.31 per barrel at $69.57, after gaining in the two previous days. London Brent crude settled down $1.36 per barrel at $67.20.  The Energy Information Administration reported gasoline stocks leapt 2.9 million barrels last week, nearly three times the build that analysts had expected. Distillate stocks -- which include diesel and heating oil -- rose by 700,000 barrels, more than double the forecast of a 300,000-barrel build.

U.S. fuel stocks remain far above five-year averages, with gasoline 7 percent above average levels and distillates 30 percent above the norm, government data show. On the bullish side, the EIA reported a decrease in U.S. crude stocks last week of 1 million barrels. It also said petroleum product demand has recovered by 5 percent since the same time week in 2008, near the height of the financial crisis.

Oil prices fell as a strengthening dollar prompted less investment in crude, which tends to hold its value or rise when the dollar weakens, as it had in two previous days. The dollar rose Wednesday, by 0.2 percent against a basket of currencies, emerging from a 10-day low yesterday against the euro and an eight-month low against the yen. The dollar gained on optimism that third-quarter earnings reports will show signs of an economic rebound.

The currency also gained as more large oil producers denied a report in Britain's Independent newspaper from Tuesday, which said they were secretly planning to begin pricing oil in currencies other than the dollar, a step that OPEC-member Iran took earlier this year.

Algerian oil minister Chakib Khelil, speaking at a conference in Buenos Aires, said OPEC would not move away from pricing crude in dollars any time soon, echoing similar denials from oil producers Saudi Arabia and Russia on Tuesday.

"The dollar still remains the currency for commodities and I hope still a reserve currency for a long time to come," Khelil told reporters. He said the dollar may lose some of its appeal as a reserve currency to other world currencies over the long-term. Khelil also said that OPEC was unlikely to raise oil output, which still outstrips demand, when the group next meets in December.