The S&P 500 has declined 0.9% since the government began on Oct. 1 its first shutdown in 17 years after lawmakers failed to reach an agreement on budgets before the start of a new fiscal year. As the shutdown delays the publication of some economic data, investors will turn their attention to companies’ financial results.
An earnings release from Alcoa, America’s largest aluminum producer, marks the unofficial start of the U.S. quarterly reporting season after the close of New York trading today. JPMorgan Chase & Co. and Wells Fargo & Co. will also report this week.
Profits for the S&P 500 probably increased 1.7% during the third quarter while sales rose 2.2%, according to analysts’ estimates compiled by Bloomberg. Analysts anticipate earnings growth to accelerate to 8.9% in the final three months of the year, the data show.
“A lot of the S&P earnings for the year are fourth- quarter loaded,” Williams at USAA Investments said. “It’s more of the commentary that counts. What I’ll be really looking to would be, from a sector perspective, both information technology and industrial’s comments on the global economy and if they’re starting to see a pickup, and then, the discretionary to see how the consumers held up.”
Even as the probability of a U.S. government default is “very, very small,” volatility in the markets will increase in coming days, Mohamed El-Erian, chief executive officer and co- chief investment officer at Pacific Investment Management Co. A U.S. default on its debt obligations would prove more unpredictable to financial markets than the 2008 collapse of Lehman Brothers Holding Inc., he said.
“What frightens us the most is what happens to the plumbing system of the global-financial system,” El-Erian said in an interview on Bloomberg Television’s “Bloomberg Surveillance” with Tom Keene. “You will have cascading failure, multiple defaults, and Treasuries that act as collateral would be very difficult to exchange and people will simply step back. It will be like Lehman, but more unpredictable.”
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, rose 1.3% today to 19.67 after a 16% surge yesterday.
Eight of the 10 S&P 500 main industries fell as telephone, raw-materials and technology stocks slipped more than 0.9% for the worst performance. Utility and consumer-staples shares gained at least 0.4%.
Xerox dropped 1.5% to $10.24. The U.S. Securities and Exchange Commission has been probing the accounting practices of Affiliated Computer Services Inc., an outsourcing company acquired in 2010, Xerox said in a regulatory filing. The SEC focused on whether revenue from ACS equipment and resale transactions should have been recorded on a net rather than gross basis, Xerox said in the filing.
J.C. Penney climbed 4.5% to $8.06 for its first gain in eight days. The department-store chain working to rebound from a $985 million loss said its sales decline slowed in September and that the improvement will last through the end of the year.
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