PRE-OPEN MARKET COMMENTS MONDAY – Last week the market rallied above horizontal resistance and the downward sloping trend line at SPY $380. It closed right at the 100-day MA on speculation that some Fed officials might soften their tone this Wednesday during the FOMC statement. Why would the Fed do this when inflation is running rampant?

The Fed wants orderly markets and after the tech bloodbath last week it does not want to see the bottom fall out of the S&P 500 into year end. It wants consumers to feel confident and it wants them spending into the holiday. That puts everyone in a good mood and it increases the chances of a “soft landing”. I have seen this movie before.
The Fed can have their cake and eat it too. They do not need to change their policy; they just have to change a few words in the statement to lift spirits.
We are heading into a seasonally bullish period and Asset Managers are sitting on the largest pile of cash in 21 years. They noticed that the market charged higher on weak news and they do not want to miss a year-end rally. Asset Managers with a long term perspective will ask themselves, “Will the market/stock be higher than this level in two years?” If the answer is yes, they will start dipping their toe in the water. Asset Managers are not in the business of picking tops and bottoms.
Corporations are poised to buy back $1.1T this year and buybacks will keep a bid to the market. They are expected to hit $5B per day in November and they are out of the blackout period. This will keep a bid to the market.
GDP and durable goods orders were better than expected. The price deflator came in a 4.1% and that was lower than feared. Friday the PCE came in a .3% and that was in line with expectations. The Fed uses this to gauge inflation.
This week ISM manufacturing, ISM services, ADP and the Unemployment Report will be releases. Initial jobless claims have been strong the last 4 weeks and I am expecting a solid jobs report.
More than half of the S&P 500 companies have reported. The blended earnings growth rate for Q3 EPS currently stands at 2.2%. This compares to the 2.8% expected at the end of the quarter. Of the 52% of S&P 500 companies that have reported for Q3, 71% have beaten consensus EPS expectations, below the 78% one-year average. In aggregate, companies are reporting earnings that are 2.2% above expectations, below the 6.5% one-year average positive surprise rate. In general, earnings have been soft and the tech giants had very negative reactions last week. Now that they are out of the way, shorts will be emboldened.
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