Monday, November 01, 2010

Busy Week On Tap For The Markets

The markets are nicely higher in early trade, after strong data out of China was followed by good economic news here in the US also. Overnight, Asian markets rallied (China +2.5%) after a strong PMI report in China. That helped our markets head higher out of the gate, but then get a boost when our ISM Manufacturing index came in at 56.9, above estimates and above last month's reading of 54.4. The manufacturing sector continues to be the bright spot of this recovery.

That's about all the news we should expect for today, in addition to some M&A news that was announced this morning, but there are some very big items on tap for the markets for the remainder of the week: Tuesday is Election Day in the US, and the outcomes and potential for gridlock in Washington will likely move markets; Wednesday is the FOMC announcement, and the question of how big any additional QE measures will be is eagerly anticipated; last, Friday's jobs number is always a big market moving event. So this week should have plenty of fireworks.

The dollar is flattish this morning, but oil and gold prices are higher. Oil is all the way up to $83.50, and gold prices are slightly higher to $1360.

Among sector ETFs, energy is leading the way (+1.50%) so far today, followed by industrials (+1.18%); utilities (+0.25%) are lagging, along with consumer staples (+0.35%).

The 10-year yield just moved up a bit to 2.62%; while the VIX is lower to 20.93.

Trading comment: I think a lot of traders thought the market would begin to selloff this week, so this morning's strength is a bit of a surprise. Of course, today's rally could easily be reversed by any surprises out of Election Day tomorrow or the Fed on Wednesday. I raised some cash last week to be in a position to take advantage of any dips. I hope that everyone else isn't already on that same page, and thus we don't get any dips.

It was also somewhat surprising that the market didn't sell off at all last week on the news of questionable packages on that flight. It just shows that lately good news has boosted the markets, while bad news has had little damaging effect.

Earnings season begins to wind down now, and I think most view it as a big success that so many companies beat estimates and provided strong forward guidance.


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