Markets appear to be in a stall, primed for a breakout but, which way?  Equities are caught between conflicting economic outlooks; gold is stuck in a $400 point trading range and the ten-year Treasury note remains under 2%.  What gives? 

The Big Picture 

Will the wall of worry collapse or will the economy?  That seems to be the question investors and traders are confronting.  Last week the market fell on signs of a weakening manufacturing sector, yet consumer confidence rose.  The economy created only 114-thousand jobs in September yet the unemployment rate fell to 7.8%; producing howls of skepticism from those who believe the numbers have been “cooked”. 

Third-quarter earnings season swings into overdrive this week as 12 Dow Industrial Average components release results along with 79 of S&P 500 companies.  So far, 59% of reporting companies have reported results better than expected, 18% came in right on target while 24% of reports disappointed investors.  But all of this is rear-mirror action.  What will matter most is guidance going forward. 

The European Union may have won the Nobel Prize for Peace, but there remains dissension in the ranks and protests in the streets as citizens fight austerity measures and governments balk at belt-tightening.  Add to the confusion a Chinese economy that could be slowing and you have reasons for pause and reflection. 

While Wall Street is back – better than before the 2008 recession, Main Street’s recovery has been much slower.   But there are positive signs giving a lift to consumer confidence.  Auto sales are picking up while home builders reported higher construction spending.

 I, Investor

 Despite the Federal Reserve and three rounds of quantitative easing, inflation pressures are muted.  That means a small cost-of-living allowance for the 56 million people who receive social security, disability and veteran’s benefits.  That increase may be wiped out by increases in Medicare premiums – a net wash for beneficiaries. 

We’ll know for sure on Tuesday, when the September CPI and annual inflation data are released.  Expect a healthy jump in monthly retail prices reflecting rising gasoline prices.  Ahead of that, we’ll see retail sales data for September on Monday, along with business sales an inventory data for August. 

Wednesday has housing starts data on tap, while Thursday has weekly jobless claims, the Philadelphia Federal Reserve regional survey and the Conference Board’s leading economic indicator series.  Existing home sales data for September closes out the week.

Tuesday, October 23rd kicks off another two-day FOMC meeting.  Wednesday the Fed will make its announcement regarding short-term monetary policy after digesting new home sales figures.  Thursday, October 25th sees durable goods orders and pending home sales for September join weekly unemployment claims joust for attention.  The last full trading week of October ends with an advance look at third-quarter GDP and a glimpse at consumer sentiment. 

Don’t forget the second Presidential debate on Tuesday, October 16th.  With the presidential race seen as very close, any news-making headlines may sway the market.

Speak Your Mind