Equities staged the biggest rally of the year following the release of the Minutes from the September FOMC meeting. The Minutes stated “growth might be slower than they expected if foreign economic growth came in weaker than anticipated.” The Fed also commented the rising value of the dollar could dampen inflationary expectations.
In other words, the Federal Reserve all but stated no change in monetary policy for the foreseeable future, hence equities retracing Monday’s entire drop.
To write the obvious, markets are lacking conviction perhaps the result of a meandering Fed. As noted many times the Yellen Fed is faced with a daunting prospect of changing monetary policy from levels never yet experienced. Mistakes will be made because lack of benchmarks.
After the markets closed, Alcoa posted considerably stronger quarterly results than anticipated, a function of strong demand and prices. Moreover, its President stated Europe is not as bad as many believe, perhaps a direct contradiction to the Federal Reserve’s view. Is this a harbinger of results to come?
Currently analysts expect a 4.9% increase in quarterly results and a 3.4% gain in revenues.
What will happen today? Weekly jobless claims are released at 8:30.
Last night the foreign markets were mixed. London was down 0.25%, Paris down 0.45% and Frankfurt up 0.22%. Japan was down 0.75% and Hang Sang up 1.17%.
The Dow should open moderately lower perhaps on the realization that prices went too far too fast. The 10-year is up 11/32 to yield 2.28%.
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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.
