Monday Morning Musings
Markets are nicely higher on improved investor sentiment after news came out that Larry Summers pulled his name from the pool of candidates for the Federal Reserve Chairman. Mr. Summers had been seen as the more hawkish candidate, so his exit leaves Janet Yellen as the favorite and Ms. Yellen is considered more likely to carry out the Fed's current Fed policy.
There was also some geopolitical news over the weekend that the US and Russia have agreed to dismantle Syria's chemical weapons by the middle of next year. Oil prices are lower near $106.87 on that news.
In economic news, the Empire Manuf. index for September came in at 6.3, which was below expectations and down from last month's reading of 8.2.
Asian markets were mixed overnight with Japan closed for a holiday. But the approval rating of Japan's PM cabinet increased to 61.8% from 57.7%. Guess folks like QE over there.
Europe's markets are higher this morning. Italy's trade surplus expanded last month.
The dollar is lower today and helping to boost gold a little. The yellow metal is up slightly to $1318.
The 10-year yield is also lower today to 2.80%. This is probably due to a relief rally in Treasuries on the odds increase of Yellen taking over for Bernanke. But we still think 3.0% is in the cards in the near future.
Trading comment: Last week we said the action in the major indexes likely signaled the correction had run its course and the fact that the S&P 500 had recaptured its 50-day put the offense back on the field and made new highs a possibility. Today's buying enthusiasm has taken the SPX up to 1703. And SPX 1710 would be a new high for the year. So while this morning might not be the best time to pay up for stocks, we continue to look for weakness to use for buying as well as fresh breakouts in stocks that have been consolidating in recent weeks.