Welcome to Friday’s Morning Coffee Break – As we begin the final trading session in the week and finish off the first two full weeks of October U.S. stock indexes are on pace for the largest weekly drop in four months.  October historically is a down month as markets prepare for the final two months of the year and it appears Mr. Market wants to stay with tradition as the major indexes are down 2% or more thus far in October.  

Advanced Micro Devices Inc. (AMD, quote) lowered third quarter revenue forecast yesterday after the closing bell.  AMD said it is expecting a 10% sequential decline, due to “weaker-than-expected demand across all product lines caused by the challenging macroeconomic environment.” AMD is down over 7% in pre-market trading.

Turning to the economic front market participants will get a new look at wholesale inflation numbers before the bell.  The report is scheduled for release at 8:30 a.m. ET. Analysts’ are looking for a move higher in headline PPI to 0.8% September and a core rise of 0.2%.  Core PPI excludes food and energy. Which by the way I find to odd as food and energy is a large check of American’s budgets. August’s headline PPI was 1.7%.

Then at 9:55 a.m. ET trader will receive the University of Michigan’s preliminary October consumer sentiment

And at 2 p.m. ET the U.S. Treasury releases its federal budget statement for September.  September is the last month of the fiscal year for the U.S. government.

As traders start out their day – The Dow Jones  (DIA, quote) fair value is up by 31.61 to 13287.00, S&P 500 (SPY, quote) fair value is up by 1.96to 1429.50 and the NASDAQ (QQQ, quote) fair value is coming in at 2715.25 up by 2.34 (as of 9:25 am)

Morning Coffee Break Global Markets Watch

Asia

Asian markets overnight extended gains going into the weekend. Lead by Chinese banks for a second day in a row after China's sovereign wealth fund announced it will continue to purchase shares in major lending banks.  Trader sentiment is also looking for Beijing move to support the economy as well.

Morning Coffee Break Companies To Watch

Earnings Watch

J.P. Morgan (JPM, quote) kicks off earnings season for the big banks this morning before the opening bell.  J.P Morgan topped analysts’ expectations with $1.40 per share on revenues $25.86.  Analysts are looking for $1.21 a share on revenues of $24.4 billion.

Company Watch

Beazer Homes (BZH, quote) announced a 1 for 5 reverse stock split and will be effective today, following approval by Beazer’s shareholders.

Futures and Commodities Corner

Crude Oil

WTI crude oil prices climb for the second day today, as traders walk the thin line of weaker U.S. dollar, and report forecasting weaker crude oil demand for the remainder of the year. Adding to the mix as well are continued tension in the Middle East. For full detailed report on the crude oil demand and natural gas be sure to check out the Daily Energy Report for a compressive look at the global energy markets by Tom Pawlicki.

Equity only readers can gain exposure to WTI Crude Oil through the United States Oil Fund (USO, quote) ETF that seeks to reflect the performance, less expenses, of the spot price of West Texas Intermediate (WTI) light, sweet crude oil. The USO will invest in futures contracts for WTI light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas and other petroleum based-fuels that are traded on exchanges. It may also invest in other oil interests such as cash-settled options on oil futures contracts, forward contracts for oil, and OTC transactions that are based on the price of oil.

For natural gas traders can gain exposure through the United States Natural Gas Fund (UNG, quote) ETF that seeks to replicate the performance, net of expenses, of natural gas. The trust will invest in futures contracts on natural gas traded on the NYMEX that is the near month contract to expire.

Gold

Gold prices are approaching a record level once again.  Is gold ready to break free from the consolidation, sideways trading it’s been in for months now?  It’s not uncommon when we see months of sideways trading like we’ve seen in gold to have a strong powerful breakout to one side or the other.  With all the concerns overall global economic growth, the euro zone debt crisis, will Greece stay or not stay, the U.S. fiscal cliff rapidly approaching a good bet would to the upside with an attempt to break the $1804.40 52 week high set back on November 8, 2011.

The one of best ways to catch either a move higher or lower is to place an Entry Stop Order at above and below the range to catch the any sudden directional shifts. Protective stops can be set at the opposite ends making it set and leave order.  The same can be done in the SPDR Gold Shares Trust (GLD, quote) ETF.

Equity only readers gain exposure to the gold through the SPDR Gold Shares Trust (GLD, quote) ETF that seeks to replicate the performance, net of expenses, of the price of gold bullion. The GLD trust holds gold, and is expected to issue baskets in exchange for deposits of gold, and to distribute gold in connection with redemption of baskets.

The Morning Coffee Break Bottom Line

U.S. markets are about to open and are suggesting positive open.  Watch the Currency Shares Euro Trust (FXE, quote) it’s has been good indicator on the direction of U.S. Markets. If we open to the upside which it looks like we will and then suddenly see begin to FXE moving lower its very well could be a tell that U.S. markets are shifting or about to shift.