U.S. stocks look like they are headed down this morning. Stock futures ahead of Thursday's opening bell are set to head lower.
The downturn comes on news of more corporate earnings. Internet auction site eBay (EBAY:NASDAQ) reported third quarter earnings fell 29%. That news sent the stock price down by 5%.
On the flip side, companies such as Apple (AAPL:NASDAQ) and Caterpillar (CAT:NYSE) reported earnings that beat analyst expectations.
More earnings reports are due including 3M Co. (MMM:NYSE); communications-giant AT&T Inc. (T:NYSE); Internet retailer Amazon.com Inc. (AMZN: NYSE); tool-maker Black & Decker Corp. (BDK:NYSE); drug maker Bristol-Myers Squibb (BMY:NYSE); credit-card issuer Capital One Financial Corp. (COF: NYSE); and fast-food chain Chipotle Mexican Grill Inc. (CMG:NYSE).
But it’s not just earnings weighing on the market. The Federal Reserve Beige Book, a business survey report put out by the Federal Reserve, shows the U.S. is slowly recovering from the recession with modest gains.
The Beige Book, which is released eight times a year, is a collection of information from businesses in each of the Fed’s 12 districts. The Federal Reserve uses this information to make assessments on economic conditions, which also impacts their decisions on whether to raise, decrease or keep interest rates neutral.
The Beige Book is published two weeks prior to the Federal Open Market Committee meeting where they’ll decide the future of interest rates.
According to Bloomberg, the “survey indicates that the economy, while gaining momentum, has yet to overcome weaknesses in banking and employment.”
In fact, unemployment remains a strong concern for the Obama administration. According to the Kansas City Star, the U.S. Senate has not moved forward to extend unemployment benefits for those people who have exhausted state and federal jobless benefits.
Economists will also be closely watching this year’s holiday shopping season, which begins in a few weeks. Zach Scheidt of Death Cross Trader says companies are already jockeying for position with two large retailers headed for a price war:
Wal-Mart (WMT:NYSE) announced that it would start selling 10 hot book titles for roughly $10 apiece. However, Amazon fired back by matching the price for the same titles on its site. By the end of the week, both were down to $9 each and finally Wal-Mart hit $8.99 in a not-so-subtle way of saying, “We will undercut any price you can put out there.”
What happens when Wal-Mart and Amazon lock horns in battle? “Well, prices drop quickly and margins are suddenly under pressure,” says Zach.
Although he’s not taking sides on which business will win, he is helping readers make money from the situation. In fact, in his latest issue of Death Cross Trader, an options-based trading service, Zach recommended readers buy puts, which are going for $5.
If the stock actually hits the $46 target, the puts will be worth $34 – nearly seven times what readers paid for them! That means you could see gains between 100% and 400%.
Learn more about this trade and Zach's high-yielding options trading service, Death Cross Trader.
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