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Markets were Relatively Quiet Yesterday Even as IBM had a Massive Earnings and Revenue Miss, a Miss that is Believed to be Company Specific.

Markets were relatively quiet yesterday even as IBM had a massive earnings and revenue miss, a miss that is believed to be company specific.  For the third quarter, S & P 500 profits are now expected to rise by 5.9%, an upward revision from a 4.8% gain expected on October 10.  Sales are still projected to rise by 4.0%.

Reporting season rapidly accelerates the next three days as over 20% of the S & P 500 is reporting.  Will these reports stem the four week slide, the longest drop since August 2011?

As noted many times, the markets are entering into seasonal strength, strength that could be perhaps amplified by the outcome of the midterm election in two weeks.

All must remember, the markets historically outperform with a Democratic Congress and Administration for such have a greater propensity to spend.  This is a major reason why many on Wall Street have an affinity and support the Democratic Party for historically this Party injects more funds in the economy, hence greater economic activity and stock prices.

But the current Administration and Congress has taken this thought to a new level, amplified by crushing and daunting regulations that greatly hinders the propensity to take any risk.  Many are petrified of the regulatory entities with most believing such organizations are now strictly adversarial in nature versus ones’ used as a resource.  Most government organizations have been co-opted by partisan agenda driven bureaucrats versus level headed administrators.

It is thought, maybe some wishful thinking,  a change in Washington’s power structure will reduce the regulatory environment, or at least the attitude of such organizations where the mantra is the same as “hang the pirate at the town’s gate to intimidate all.”

Enough of the rant, today’s trading will be dictated by the plethora of earnings reports existing home sales.

Last night the foreign markets were up.  London was up 0.94%, Paris up 1.81% and Frankfurt up 1.57%.  Japan was down 2.03% and Hang Sang up 0.08%.

The Dow should open moderately higher as earnings are exceeding expectations.  The 10-year is off 3/32 to yield 2.21%.


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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.