Fed Speakers And Beige Book, Bank Earnings, Rising Crude Take Center Stage

Another morning and another big bank with a blowout earnings report. But the overall market doesnt seem to be getting much of a boost from the news.

This time the bank is Morgan Stanley (NYSE:MS), which reported a sharp jump in trading revenue, following in the path of other banks reporting so far. While MS took center stage first thing, it looks to be a busy day in the markets, with a string of earnings reports, the Feds Beige Book release, and Fed speakers on the prowl. Stocks were just a little above unchanged early.

Each of the major banks reporting so far this earnings season came in with big leaps in trading revenue, and MS was no exception. Bond trading at MS rose 61%, and it appears the business got a lift from demand centered around a possible Fed rate hike and concerns about the effects of Brexit. Overall, MS reported earnings of 81 cents a share, easily surpassing Wall Street analyst consensus of 63 cents. Revenue climbed 15% to $8.91 billion, compared with projections of $8.13 billion.

Financials continue to do well, and that includes regional banks, too, with U.S. Bancorp (NYSE:USB) also reporting earnings that exceeded expectations early Wednesday. Fixed income trading is adding to banks bottom lines after many years of struggle, and that may be a good sign not just for big banks but for market participants overall.

After the close Wednesday, stay on the lookout for more earnings from some key companies, (see below). About 20% of S&P 500 companies report this week, so this week and next really represent the true heart of earnings season.

Investors may want to look beyond earnings today to monitor what Fed officials have to say. San Francisco Fed President John Williams is scheduled to speak about diversity in the financial system in Newark, N.J., at 8:45 a.m. ET, while Dallas Fed President Rob Kaplan will make a speech in Fort Worth, Texas, at 1:30 p.m. On Wednesday evening, New York Fed President William Dudley will speak in New York. Odds of a December rate hike remained at close to 70% early Wednesday, according to Fed funds futures at the CME Group. And dont forget to keep an eye out for overseas central bank news Thursday, when the European Central Bank (ECB) holds a meeting to discuss its monetary policy program.

The Fed is scheduled to release its Beige Book at 2 p.m. ET today, offering a look at how U.S. regional economies are performing. The thing to look for there is whether were seeing a consistent message in terms of business conditions improving.

Crude oil futures stayed above $50 a barrel after the American Petroleum Institute (API) reported a 3.8 million barrel decline in U.S. crude supplies for the week ended Oct. 14. That was in contrast to analysts estimates for a rise of 2.5 million barrels, MarketWatch reported, and may reinforce concerns expressed by some analysts earlier this week that supplies arent rising as quickly as normal heading into the last months of the year. Nevertheless, crude didnt seem to be giving the stock market much of a boost, despite the correlation being back between crude and the S&P 500 Index (SPX). The Energy Information Administrations (EIA) weekly supply data is scheduled for later today.

In the energy sector, Halliburton Company (NYSE:HAL) reported better than expected earnings, which could mean that stronger crude oil prices may improve prospects for energy companies overall, something to watch as earnings season continues.

Health Care In Recovery Room: The embattled health care sector, the weakest-performing sector year to date with a 3.6% loss, was back on its feet Tuesday, jumping more than 1% to lead all sectors thanks in part to earnings results from some big names. Among these were UnitedHealth Group Inc (NYSE:UNH) and Johnson & Johnson (NYSE:JNJ). Both exceeded analysts expectations, and UNH got a particular boost from the strong performance of its health benefits business. JNJ reported strong sales of its pharmaceutical products and raised guidance. Other than these two, and Abbott Laboratories (NYSE:ABT), which reports Wednesday, this week seems relatively quiet from the health care earnings standpoint. Investors with their eyes on health care may want to stay tuned for next week, with earnings from Baxter International Inc (NYSE:BAX) and Merck & Co., Inc. (NYSE:MRK) scheduled for Tuesday. Health care has been under pressure lately, in part due to the coming presidential election. Concerns are building about how each candidate might change health policy if they win. Biotech has been especially hard hit the last few weeks.

Earnings to Watch Wednesday and Later This Week: This afternoon, stay on the lookout for earnings from some consumer names, including eBay Inc (NASDAQ:EBAY), Mattel, Inc. (NASDAQ:MAT), and American Express Company (NYSE:AXP). The early earnings news has been dominated by financials, but now we may start getting a look at how consumers did during the quarter. One of the bigger companies catering directly to consumers is McDonalds Corporation (NYSE:MCD), and that behemoth reports before the open Friday. Another key company with earnings on the way later this week is General Electric Company (NYSE:GE), also on Friday morning. Analysts polled by Briefing.com now expect MCD to exceed its year ago earnings per share, with the consensus estimate at $1.48, vs. $1.40 a year ago. But analysts see GEs earnings per share dropping to 30 cents, down from 32 cents a year ago.

Inflation Stays Muted; What are Rate Implications? Though it was almost lost amid all the earnings reports this week, the Consumer Price Index (CPI) for September came out Tuesday basically as analysts had expected, showing 0.3% growth overall but only 0.1% for core CPI excluding energy and food. Seeing the total figure go up 0.3% is no surprise, because energy prices rose last month. Looking at the core figure, its on the positive side of the ledger, which is good from the Feds perspective, but perhaps still not as high as the Fed might like. And the core reading was actually down from Augusts 0.3%. The Fed has said its target is for 2% annual inflation growth, though it also monitors inflation indicators other than CPI. The overall CPI was up 1.5% year over year in September, the biggest year-over-year jump in nearly two years. And core CPI rose 2.2% year-over-year. What do these inflation figures mean when it comes to interest rates? It might be interesting to see if todays Fed speakers have anything to say on the topic.

TD Ameritrade and all third parties mentioned are separate and unaffiliated companies, and are not responsible for each others policies or services. Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold. Market volatility, volume, and system availability may delay account access and trade executions. Past performance of a security or strategy does not guarantee future results or success. Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options. Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request. The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading. TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. 2016 TD Ameritrade IP Company, Inc. All rights reserved. Used with permission.