Small Gains Put Dow on Track for Record S&P and Nasdaq Tick Higher

Small gains on Wall Street on Wednesday, Oct. 11, put the Dow Jones Industrial Average at records, though any stronger moves would have to wait until investors get clarity from the Federal Reserve during the afternoon.

The Dow Jones Industrial Average was up 0.09%, trading at records, the S&P 500 gained 0.07%, and the Nasdaq added 0.1%. Any gain for the Dow would put the index at a closing record for another day.

The S&P 500 and Nasdaq's course was less certain, hovering near all-time highs, but not solidly over the line. The S&P 500 would need to clear 2,552.07 to mark a new record, while the Nasdaq would have to close higher than 6,590.18.

A rally in consumer stocks stretched into day two on Wednesday, this time led by deal talks and analyst action in two of the sector's largest names. Kroger Co. (KR) jumped 2.5% on the announcement it was considering unloading its convenience store business. The company is exploring strategic alternatives for its 784 convenience stores stretched across 18 states. Goldman Sachs is advising the process.

Colgate-Palmolive Co. (CL) increased 2.4% after SunTrust Robinson Humphrey upped its rating to buy from hold and boosted a price target to $85 from $65. Analyst William Chappell Jr. sees weakness over the past three quarters as an "anomaly." In the fourth quarter, Chappell expects the company to "cycle through these issues" and "embark on a path back to its target organic growth rates."

Kroger and Colgate-Palmolive led consumer staples stocks in another rally on Wednesday. Walmart Stores Inc. (WMT) had driven gains a day earlier. Other stocks on the rise on Wednesday included Unilever NV (UL) , PepsiCo Inc. (PEP) and Ambev SA (ABEV) . The Consumer Staples Select Sector SPDR ETF (XLP) increased 0.3%.

Investors will get insight into the Fed's thinking when minutes from the central bank's September meeting are released at 2 p.m. ET. At its Sept. 19-20 meeting, the Fed opted to leave rates unchanged at 1% to 1.25%. As expected, the Fed also said that it would begin unwinding its massive balance sheet, beginning with a reduction of up to $10 billion a month.

One surprise was that Fed members sounded far more hawkish on the future path of rate hikes. Investors had predicted that the Fed would slow the pace of rate hikes as the U.S. economy faces consistently soft inflation coupled with wage growth stuck in neutral. Even so, 12 of the 16 FOMC members said that they anticipate a third rate hike this year, while 11 of the 16 anticipate three hikes next year.

The chances of a December rate hike currently sit at 92%, according to CME Group fed funds futures. Markets are currently pricing in a 25-basis-point rate hike that would put the federal funds rate at 1.25% to 1.5%.

Meanwhile, Chicago Fed President Charles Evans said that it was too early to determine whether December was right for a rate hike. Evans told Bloomberg that inflation remains too low and he doesn't expect the measure to reach its 2% target soon.

Big banks kick off the third-quarter earnings season at week's end. Citigroup Inc. (C) and JPMorgan Chase & Co. (JPM) will report earnings on Thursday, Oct. 12, and Bank of America Corp. (BAC) , Wells Fargo & Co. (WFC) and PNC Financial Services Group Inc. (PNC) on Friday, Oct. 13.

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Analysts anticipate another quarter of earnings growth. The third-quarter blended earnings growth estimate sits at 5.5%, while revenue growth is expected to come in at 4.3%, according to Thomson Reuters estimates.

"Hurricane impacts aside, we have several reasons to be optimistic, including solid manufacturing data, recent U.S. dollar weakness, and resilient estimates," LPL Research analysts wrote in a note. "The S&P 500 Index has exceeded earnings expectations 33 straight quarters and we see no reason why the third quarter won't make it 34."

Crude oil prices were slightly lower on Wednesday even after the Energy Information Administration upped its forecasts through to 2018. The agency anticipates West Texas Intermediate to settle at around $49.69 a barrel this year, 1.7% higher than previous targets, and to climb to $50.57 a barrel next year, 2% higher than before.

West Texas Intermediate crude was down 0.2% to $50.80 a barrel on Wednesday.

The number of job openings held near record highs in August, according to the latest Job Openings and Labor Turnover Survey. The measure fell to 6.08 million from 6.14 million in July. Openings rose to their highest level in seventeen years in July.

Alibaba Group Holding Ltd. (BABA) , the Chinese e-commerce giant, said Wednesday it would invest more than $15 billion in research and development over the next three years, with the intention of increasing collaboration and developing cutting-edge technologies.

Alibaba said it was launching the Alibaba DAMO Academy, which stands for discovery, adventure, momentum and outlook, to oversee the opening of R&D labs worldwide and to recruit scientists and researchers. Alibaba's chief technology officer, Jeff Zhang, will lead the unit.

Barracuda Networks Inc. (CUDA) fell 11% after reporting quarterly earnings and sales that matched analysts' estimates. Adjusted second-quarter profit of 17 cents a share was in-line with forecasts, while revenue increased 7.3% to $94.33 million, only just beating expectations. Subscription revenue increased 13.6% and the total number of active subscribers grew 17%.

Delta Air Lines (DAL) topped third-quarter earnings estimates despite a loss of $120 million from Hurricane Irma. Adjusted earnings of $1.57 a share beat by 3 cents. Revenue increased 5.5% to $11.06 billion, exceeding estimates by $20 million. Unit revenue gained 1.9%, while load factor rose by 150 basis points to 86.9%.

Amazon.com Inc. (AMZN) edged higher on Wednesday after Credit Suisse upped its price target to $1,350 from $1,000 and reiterated an outperform rating. Analyst Stephen Ju is confident in Amazon's position in the grocery market even as competitors up their investment in the space.

Ju also lifted his price target on Snap Inc. (SNAP) to $20 from $17. The price target increase suggests a 39.5% upside to its current levels. Ju expects daily active users in North America to increase to around 3.2 million from 1.5 million.

SeaWorld Entertainment Inc. (SEAS) was up slightly after Merlin Entertainments PLC shut down rumors of takeover discussions. SeaWorld had spiked last week on reports the U.K.-based owner of Legoland was considering an acquisition to expand its overseas presence. In a statement, the company said that it was "not involved in any discussions that might lead to an acquisition of SeaWorld or any of its constituent parts."

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Updated from 11:19 a.m. ET, Oct. 11.

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