NEW YORK ( TheStreet) -- Tuesday was a strange session. The banks led the market higher, Apple ( AAPL) disappointed the faithful, and news of a major European bank at the brink was somehow a good thing. Federal Reserve Chief Ben Bernanke didn't really veer from the script in testimony on Capitol Hill but it still seems notable that he told legislators the U.S. economy's recovery is "close to faltering" and stocks were able to recover anyway. The buyers that crashed the party in the last hour of trading are evidently putting a lot of stock in reports of talks that Europe's leaders are looking for ways to cooperate on recapitalizing banks across the pond. Hardly concrete with a plethora of moving parts to boot. And since these leaders have been talking all along and seemingly made very little progress on anything so far, it's advisable not to get too carried away in thinking that the contagion will be contained. No details on how this helps Greece yet either. For what that's worth. There's also the view that traders took some solace in the idea that Belgian bank Dexia is going to go the "bad bank" route, maybe providing a template for how a crisis will be averted in the old country. Excuse Citigroup ( C) shareholders if they don't stand up and cheer. The S&P 500 made a brief foray into bear market territory, and caught a bounce as most strategists were expecting at some point, given the devastation wrought on stocks in the third quarter, and Monday's ignominious start to the fourth quarter. The action was choppy in part because there's a lull in corporate news right now with earnings season not to set to begin in earnest for another few weeks, so a pessimist might say the banks caught a well-timed bounce with the FT report and were able to snap back on little substance, taking the broad market along with them. Holding those gains through Wednesday's session may prove more of a challenge, and we may yet see Bank of America's ( BAC) share price dip below its $5 per month debit card fee. Late-night television hosts and other practitioners of snark are undoubtedly crossing their fingers in hope.
Wednesday brings the usual mid-week preludes to the government's monthly jobs report on Friday with the Challenger report on job cuts for September crossing the wires at 7:30 a.m. ET and the employment change report from Automatic Data Processing for September due at 8:15 a.m. The ADP report typically gets more attention, although it's known for not necessarily being indicative of what the government's job report will say. In August, ADP said private-sector employment rose by 91,000, and the consensus view for September is for the addition of just 70,000 jobs. Ian Shepherdson, chief U.S. economist at High Frequency Economics, sees the potential for a disappointment in the ADP number. His estimate is at 50K. "
T he key problem is that the pace of gross hiring is deteriorating faster than the pace of gross firing," he writes, adding later: "We have much better information on firing -- thanks to claims numbers -- than hiring ... so we worry that both ADP today and the official payroll report on Friday could surprise to the downside." The other economic data on Wednesday is the MBA Mortgage Index for the week ended Oct. 1, a measurement of application activity, arriving at 7 a.m, the Institute of Supply Management services index for September slated for 10 a.m., and crude inventories for the week ended Oct. 1 will be released at 10:30 a.m. The mortgage index spiked 9.3% last week, primarily because of a jump in refinancings with rates at historic lows, but there's not much there for Wall Street to get excited about. Same with the ISM services index, which can be pretty erratic. The morning's big earnings report will be Costco Wholesale ( COST), the discount warehouse retailing juggernaut. The stock has been a standout performer so far in 2011, rising more than 13%, and the Issaquah, Wash.-based company is expected to report a profit of $1.10 a share for its fiscal fourth quarter ended in August on revenue of $27.84 billion. Wall Street is leaning bullish on the stock with 14 of the 26 analysts covering Costco at either strong buy (8) or buy (6) and the median 12-month price target at $87. The stock closed Tuesday at $81.65 but hit its 52-week high of $86.34 on Sept. 20.
Last time around, Costco missed the consensus view by 5%, coming in with a profit of 73 cents a share vs. the average analyst estimate of 77 cents. McAdams Wright Ragen, which has a hold rating and an $80 price target on the stock, is expecting a slight beat this time around, forecasting earnings of $1.12 a share, and noting that the company will also give insight into September's sales performance. "We expect Costco to report September comps growth in the 11% range, or approximately 6% excluding combined gas/FX benefits of about 500 basis points, we estimate," the firm said in a research note previewing the report on Tuesday. "The company faces a +5% prior-year comparison, which is one of its easier monthly comparisons in the past year. Inflation remains a factor, particularly in the food categories, helping to drive higher average ticket." The other earnings reports to keep an eye out for are Monsanto ( MON) in the morning, and Marriott International ( MAR), Ruby Tuesday ( RT), and Christopher & Banks ( CBK) after the closing bell. And finally, Acme Packet ( APKT) will be facing heavy selling pressure on Wednesday after the company gave a weak forecast for its fiscal third quarter. The stock made a rare appearance among the most active names in the after-hours session, down more than 15%. -- Written by Michael Baron in New York.