A window of opportunity opened for the bulls Tuesday morning. Inflation jitters were again set aside, if only temporarily, as investors focused on strong earnings from Genentech ( DNA) before the open and Alcoa ( AA) Monday after the close. But investors' hesitancy to embrace stocks remained evident ahead of the 2 p.m. EDT release of the minutes of the Federal Reserve's Sept. 20 meeting, when the central bank hiked rates and signaled more to come, determining that inflation risks outweighed growth concerns after Hurricane Katrina. After trading as high as 10,301 earlier, the Dow Jones Industrial Average was recently up 7.52 points, or 0.07%, at 10,246.28. The S&P 500 was down 2.84 points, or 0.24%, at 1184.49. It earlier had risen to 1193. And while tech bulls are anticipating strong results from tech darlings Apple ( AAPL) and Advanced Micro Devices ( AMD) after the close, the Nasdaq Composite was underperforming, recently down 15.97 points, or 0.77%, to 2062.95, off an earlier high of 2085. It could be that the heavy selling pressure experienced last week -- and a less severe version on Monday -- still needs to run its course. There is likely more bad news to come about just how serious a risk Fed officials perceive inflation to be -- with some revelations on that front presumably forthcoming in the Sept. 20 Fed minutes. (Ahead of the release, the price of the benchmark 10-year Treasury note was recently down 8/32, its yield rising to 4.39%.)
Looking for a Catalyst
It could be that the Nasdaq's drop is simply setting the stage for a much anticipated fourth-quarter rally, one that could be sparked by strong earnings from Apple. "We need some kind of impetus to really get us going," says Donald Selkin, director of equity research at Joseph Stevens. "Energy prices coming down have not helped and there is nothing on the interest rate front that's going to help. The only thing that is going to help us is earnings, and Apple is a big one."