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Stock Market Update for 10/27/2010

October 27, 2010

Stocks Mostly Lower In Mid-Morning Trading

Stocks are largely on the downside in mid-morning trading on Wednesday even after a better than expected reading on new home sales. Traders have largely shrugged off the data ahead of next week’s Federal Reserve meeting as well as the midterm elections.

The major averages are currently all in negative territory, although the Nasdaq is posting a relatively modest loss. The Nasdaq is down 6.70 points or 0.3 percent at 2,490.59, while the Dow is down 103.19 points or 0.9 percent at 11,066.27 and the S&P 500 is down 9.22 points or 0.8 percent at 1,176.42.

In a sign that the U.S. housing market may have hit bottom in recent months, the Commerce Department released a report showing that new home sales rose 6.6 percent to an annual rate of 307,000 in September from an annual rate of 288,000 in August. Economists had expected sales to show a more modest 3.8 percent increase to an annual rate of 299,000.

While new home sales remain at relatively low levels, the annual rate has moved well off the record low of 282,000 set in May. Nonetheless, the annual rate of new home sales in September is still 21.5 percent below the rate seen in the same month a year ago.

Earlier, the Commerce Department released a separate report showing that durable goods orders surged up by 3.3 percent in September following a revised 1.0 percent decrease in August. Economists had expected orders to increase by 1.8 percent compared to the 1.5 percent drop that had been reported for the previous month.

However, excluding a 15.7 percent jump in orders for transportation equipment, durable goods orders actually fell by 0.8 percent in September compared to a 1.9 percent increase in the previous month. The decrease surprised economists, who had expected ex-transportation orders to edge up by 0.2 percent.

In earnings news, Procter & Gamble Co. (PG) reported that its first-quarter net earnings declined to $1.02 per share from $1.06 per share in the same quarter last year. Analysts has expected the consumer products giant to earn $1.00 per share for the quarter.

P&G’s net sales for the period came in at $20.12 billion, failing to meet expectations for $20.25 billion for the quarter.

Sprint Nextel Corp. (S) reported a third-quarter net loss of $0.30 per share slightly sharper than the expected loss of $0.28 per share for the quarter. Revenues came in at $8.15 billion, topping forecasts for $8.03 billion.

Transportation and logistics services firm C.H. Robinson Worldwide (CHRW) reported third quarter net income of $0.62 per share, just above expectations for $0.61 per share. Total revenue for the quarter rose 23.8 percent to $2.42 billion but still fell short of estimates for $2.48 billion.

Sector News

Gold stocks are among the morning’s worst performers, dragging the NYSE Arca Gold Bugs Index down by 3 percent. The decline has the index on pace for its lowest close in six weeks.

Selling among gold stocks comes as the price of the precious metal is down by $10.50 to $1,328.10 an ounce. The price drop is partly due to strength in the value of the U.S. dollar.

Steel, railroad, natural gas and oil stocks are also under pressure, further weighing on the major averages. Notably, the NYSE Arca Steel Index is down by 2 percent and on pace for a monthly closing low.

On the other hand, strength among semiconductor stocks is helping to moderate the pullback by the tech-heavy Nasdaq index, with the Philadelphia Semiconductor Index up by 1.7 percent. The buying interest in the sector comes after Broadcom (BRCM) reported third quarter revenues above expectations.

Stocks Driven By Analyst Comments

Abbott Labs (ABT) is posting a notable loss after analysts at Argus dropped their rating on the stock from Buy to Hold. The stock is currently down by 2.3 percent, sinking to a six-week intraday low.

BJ Restaurants (BJRI) is also moving lower after Oppenheimer downgraded the stock from Outperform to Perform. Shares are currently down by 3.6 percent, pulling back off of the all-time closing high of $35.13 set yesterday.

Meanwhile, Motorola (MOT) is trading higher after being upgraded by MKM Partners from Neutral to Buy and seeing its price target raised from $7 to $10. The stock is up by 1.3 percent, moving further off of last week’s seven-week closing low.

Other Markets

Overseas, stock markets in the Asia-Pacific region ended mostly lower on Wednesday. Hong Kong’s Hang Seng Index lost 1.9 percent and India’s BSE 30 sank by 1.1 percent, while Japan’s benchmark Nikkei 225 Index bucked the downtrend, inching up by 0.1 percent.

The major European markets are also showing varied losses. The German DAX Index is down by 0.2 percent, while the U.K.’s FTSE 100 Index and the French CAC 40 Index are both down by 0.7 percent.

In the bond markets, treasuries are seeing moderate downside. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 2.698 percent, posting a gain of 6.2 basis points.

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