Ken
Mahoney tells CNBC that the market is like ‘Teflon’.
Ken was on
CNBC this past Friday http://video.cnbc.com/gallery/?play=1&video=3000211347
(Link is only
part of the segment)
Ken told Maria
Bartiromo on CNBC that this market is like ‘Teflon’, negativity does not stick
to it! He also mentioned that Washington only ‘hit the snooze button, and that
the alarm will be going off again soon’. Ken believes that this puts a short
term ceiling to the market because of the uncertainty from Washington.
Markets
extended their post-deal rally for another week, putting up several new
records: The S&P 500 closed out the week at another all-time high, while
the Nasdaq ended at a 13-year high. No records yet for the Dow, but it’s
putting up a good fight, gaining 5.4% over the last 13 trading sessions. For
the week, the S&P 500 gained 0.88%, the Dow increased 1.11%, and the Nasdaq
grew 0.74%.[i]
After
a delay of several weeks, investors finally got a look at September’s jobs
report and the news was mixed. While the unemployment rate dropped to 7.2%,
hiring appears to have slowed. Employers added just 148,000 new jobs in
September, well below the 180,000 that economists had expected.[ii]
On
a more positive note, third quarter earnings have been slightly better than
expected with earnings growth averaging 6.8% among the 243 S&P 500
companies that have already reported in. So far, 68% have beaten earnings
estimates and 54% have beaten revenue estimates, trends that are above the
historical averages. However, with the price-to-earnings ratio (a broad measure
of the value of stocks) of the S&P 500 currently above its long-term
average, some analysts are debating how much higher the market can go if the
pace of earnings growth doesn’t pick up.[iii]
Weak
economic data means that the Federal Reserve is unlikely to make any changes to
its policy of quantitative easing at this week’s FOMC meeting. Instead, they’ll
pore over the economic data to see how badly Washington ’s
battles have hurt the U.S.
economy. Consumer and business confidence may suffer lasting harm after the
shutdown, especially as the current deal only postpones the fight until the New
Year. Making matters worse, the shutdown interrupted regular data-gathering and
analysis functions, muddying the economic picture for Fed policymakers. Some
analysts believe that they could stand pat the rest of the year, delaying a
taper until March, after the next round of fiscal debates and the new Fed
Chairman takes over.[iv]
Investors
may be in for choppy waters this week as analysts struggle to parse economic
data that’s muddled by seasonal factors as well as disruption caused by the
government shutdown. Earnings will also be front and center as nearly a quarter
of S&P 500 companies are due to report, including heavy hitters like Apple
(AAPL), General Motors (GM), and Exxon (XOM.) While no major action is expected
out of the two-day Fed FOMC meeting, a surprise could cause additional market
volatility.
As
always, if you have any questions about how recent events may affect your
investments, please reach out, we’d be delighted to speak with you.
ECONOMIC CALENDAR:
Monday: Industrial Production, Pending Home
Sales Index, Dallas
Fed Mfg. Survey
Tuesday: Producer Price Index, Retail Sales, S&P
Case-Shiller HPI, Business Inventories, Consumer Confidence
Wednesday: ADP Employment Report, Consumer Price
Index, EIA Petroleum Status Report, 7-Yr Note Auction, FOMC Meeting
Announcement
Thursday: Jobless Claims, Chicago PMI
Friday: Motor Vehicle Sales, PMI
Manufacturing Index, ISM Mfg. Index
.
HEADLINES:
Consumer sentiment drops after government shutdown. Sentiment among U.S. consumers
dropped in October to its lowest level since the Fiscal Cliff days as Americans
worried about congressional dysfunction. Consumers also also worried about how
the budgetary impasse may have affected fourth-quarter growth.[vi]
Wholesale inventories rose in August. Inventories rose 0.5% in August, the
biggest jump since January, indicating that business experienced a robust
summer shopping period. Inventory growth was boosted by increases in stocks of
autos and professional equipment.[vii]
“The best and most
beautiful things in the world cannot be seen or even touched-
they must be felt with
the heart.” – Helen Keller
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