MarketView for October 24

Summary

The major equity indexes ended lower for a second consecutive day on Wednesday, as Wall Street soured on another round of underwhelming corporate results and the Federal Reserve said it would stick to its stimulus plan until the job market improves. The S&P 500 index has chalked up a loss of  3.6 percent over the past five sessions, hurt by weak earnings outlooks and top-line revenue misses from large multinational corporations. The index is now down 3.9 percent from its closing high of 1,465.77 set on September 14.

Boeing was an exception to the declining mood with a more optimistic outlook, but it could not break away from the rest of the market as it was pulled into negative territory in the afternoon. Shares of the company, a Dow component, ended the day down 0.2 percent to $72.71.

The Fed, in its latest policy statement, said it would keep buying $40 billion in mortgage-backed debt per month to keep interest rates low until the job picture improved. On September 13, the Fed unveiled a third round of economic stimulus, or quantitative easing, known as QE3.

After the close, shares of Best Buy fell 6.9 percent to $15.75 after the retail giant warned that its fiscal third-quarter earnings and same-store sales would fall. Best Buy closed the regular session at $16.92, up 0.3 percent.

Zynga ended the day up 12.7 percent to $2.40 in after-hours trading. The  company raised the lower end of its 2012 earnings outlook. In regular trading, Zynga fell 3.2 percent to close at $2.13.

During the regular session, Facebook ended the day up 19.1 percent to $23.23 a day after the social networking company's quarterly results showed a surprising surge in mobile advertising revenue.

Shares of Apple, scheduled to report after Thursday's close, rose 0.6 percent to $616.83.

Dow Chemical said late on Tuesday it would cut 5 percent of its work force and shut 20 plants to counter a slowing global economy. As a result it share price ended the day up 4.7 percent to close at $29.88.

On the down side, shares of Netflix fell 11.9 percent to $60.12 after it cut its subscriber forecast. EMC fell 0.9 percent to close at $24.46 after it cut its full-year outlook. Eli Lilly and Bristol-Myers Squibb posted lower-than-expected earnings. As a result, Eli Lilly ended the day down 2.7 percent to $50.50. Shares of Bristol-Myers fell 0.6 percent to close at $33.05.

With results in from 186 of the S&P 500 companies, 59.1 percent have reported earnings above analysts' expectations, below the 62 percent long-term average, according to Thomson Reuters data. Looking at revenue, 38.2 percent of companies have beaten analysts' expectations, while 61.8 percent have fallen short. In a typical quarter, 62 percent of companies exceed estimates.

Shares of homebuilders' stocks ranked among the session's best performers. Shares of PulteGroup ended the day up 0.8 percent to close at $17.45. Sales of new single-family homes rose 5.7 percent in September to the highest level in nearly 2-1/2 years, offering more evidence that the housing market's recovery is improving.

Approximately 6.2 billion shares changed hands on the three major equity exchanges as compared with the year-to-date average daily closing volume of 6.51 billion shares.

Manufacturing Improves

Manufacturing improved slightly in October but slow growth and economic uncertainty suggested the sector's recent struggles may persist over the final months of 2012, an industry survey showed on Wednesday.

Markit said its U.S. "flash," or preliminary, Purchasing Managers Index for the manufacturing sector edged up to 51.3 this month from 51.1 in September. A reading above 50 indicates expansion.

A modest rise in output helped boost business conditions in the sector, which suffered its weakest quarter in three years during the July-to-September period. However, fewer orders from domestic clients and a fifth straight monthly decline in overseas demand for U.S. goods indicates manufacturing was acting as a drag on growth and employment.

Fuel, energy and raw material costs drove up overall input costs this month, with the rate of inflation the steepest since April. Yet, there was very little pass-through to consumers. Average selling prices rose only slightly, Markit said, and some firms said increased competition limited overall gains.

The "flash" reading is based on replies from about 85 percent of the U.S. manufacturers surveyed. Markit's final reading will be released on the first business day of the following month.