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Equities were quiet with all assessing whether the six week rally is the “real thing” or just a dead cat bounce taking stocks too far too fast.  The dollar halted a five day slide while Treasuries were little changed.

Crude was quiet until late day selloff sent oil down about 2.9%, a selloff predicated upon the prevailing narrative that Saudi Arabia will not freeze production unless Iran also freezes output. Approximately 70% of global production is meeting in two weeks to discuss such actions.

The financial chaos of the oil producing countries is now becoming extremely pronounced.  Will the supply disruptions in Iraq and Nigeria—the result of geopolitical turmoil—become more pronounced because of this fiscal chaos?  Historically economic unrest ferments civil unrest, an environment that could be amplified given the 1200 year animosity between the two major Islamic sects.

There was little reaction to the data or to Fed statements regarding potential changes in monetary policy.

Next Monday is the commencement of first quarter earnings season.  To write the obvious, the interpretation of the results will offer considerable input in determining whether the current advance was a dead cat bounce or bona fide advance and transition into the value orientated issues.

What will happen today?  The ISM Non Manufacturing Index as well as the trade gap is released.

Last night the foreign markets were down.  London was down 1.38%, Paris down 2.12% and Frankfurt down 2.30%.  China was up 2.61%, Japan down 2.42%and Hang Sang down 1.57%.

The Dow should open moderately lower even as oil is flat, perhaps the result of Europe’s declines.  As stated above, earning season is now becoming the focus.  At this juncture analysts are expecting about a 9% decline but considerable emphasis will be placed on profit margins and revenue growth.  I think profits will decline but not by the magnitude as suggested as the bar is set too low.  All will scrutinize forward looking statements and the potential veracity of such.

The 10-year is up 9/32 to yield 1.74%.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.