U.S. MARKET AVERAGES

On a day of earnings, inflation news dominated trading. Labor Department release of wholesale inflation at Producer’s level for the month of September 1.9% was significantly higher than the market’s forecast of 1.2%. Core inflation also came in at 0.3% vs. expectation on 0.2%. In fact, PPI jumped the most in the last 15 years. Market did not like that.

Market immediately came under pressure and failed to recover during the rest of the session. Last hour of trading saw market averages deteriorated as sellers gained upper hand on buyers.

Fall in energy price did not help the cause of buyers as market worried that Fed will maintain its interest rate hike campaign. Crude oil fell 2% dragging with it stocks of refiners, explorers and oil equipment and service providers.


MOVERS AND SHAKERS

3M Co. (MMM: chart) posted third-quarter results that were above analyst expectations. Sales increased 8.3% in the three months ended September 30 to $5.38 billion from $4.97 billion in the same period a year ago, according to the report. The company also increased its share buyback program. 3M Co.’s stock gained 1.4%.

Diversified industrial company United Technologies Corp. (UTX: chart) raised its profit outlook for this fiscal year after its third-quarter report topped expectations. The company posted earnings of $821 million, or 81 cents a share, up from $693 million, or 68 cents, in the same period a year ago. Quarterly revenue came to $10.91 billion from $9.34 billion, up 17%, according to the report. The stock fell 1% yesterday, but it is likely to gain today.

Healthcare company Johnson & Johnson (JNJ: chart) could be under pressure after it has reported a third-quarter profit that topped analyst estimates, but its sales fell below Wall Street forecast.

IBM (IBM: chart) reported earnings that came in ahead of Wall Street expectations. The computer giant posted net income of $1.52 billion, or 94 cents a share, for the three months ended September 30, down 2.5% from $1.55 billion, or 92 cents, a year ago. Sales from continuing operations increased slightly as the company sold more hardware and services. The company’s stock added 2.6%.

In financial sector, Merrill Lynch’s (MER: chart) stock was up 2.1% as the investment bank posted a record profit for its third quarter, easily jumping over analyst estimates. Wells Fargo (WFC: chart) also reported earnings that came in above analyst expectations.

In semiconductor sector, Goldamn Saches downgraded Texas Instruments (TXN: chart) to “underperform” from “in-line”, pointing increased competition from Qualcomm Inc. (QCOM: chart) in the third-generation broadband business. At the same time, the financial broker upgraded Entegris Inc. (ENTG: chart) to “outperform” from “in-line”, citing merger and business divestitures are likely to create improved secular earnings. The sector is likely to be in focus today.

ECONOMIC NEWS

Wholesale prices rose at their fastest pace in over 15 years in the month of September, according to a report from the Department of Labor. The sharp increase in prices was largely due to a surge in energy prices.

The report showed that the producer price index rose 1.9 percent in September after rising 0.6 percent in August. The increase came in above economist expectations of a somewhat more modest 1.1 percent increase.

As was the case with the increase in consumer prices, the increase in producer prices was largely due to a 7.1 percent increase in energy prices. The increase reflects the sharp rise in energy prices that was seen following Hurricane Katrina.


The report also showed that the core PPI, which excludes food and energy prices, rose 0.3 percent in September after coming in unchanged in August. Economists had expected core prices to increase by 0.2 percent.

The relatively modest increase in core prices may help to offset some of the recent inflation concerns, although many traders and economists remain concerned that the surge in energy prices will start to be reflected in prices for other goods, driving the rate of inflation higher

INTERNATIONAL MARKET NEWS