Financial Professionals

Market Insights

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For the Week of October 12th

10/12/2009

The market brings some excellent positive momentum into the week of October 12th. Investors should be focused on the market's ability to extend the momentum and "breakout" beyond the September 23rd FOMC highs. The December S&P 500 futures high from that afternoon rests at 1075.75. On Friday, October 9th the settlement was 1068.00. The lift could come from a combination of economic data and a litany of earnings from some "best in breed" companies. A breakout above 1075.75 suggests a challenge to 1120.00 before year-end and support for all risky asset prices.

Also in focus this week is the Treasury market. The end of last week was highlighted by a back-up in yields for the long end of the curve. The question becomes - does that evolve into something larger now that the 30 year yield has risen back above 4%? There has been tremendous support for Treasuries over the past few months which has suppressed yields and pushed investment dollars into risky assets such as equities. Clearly, this is a development worth watching.

Monday October 12 - Columbus Day

The bond market will be closed however the equity market is open. A repeat of Columbus Day 2008 would be nice! Remember the historic 935 point Dow rally on Columbus Day October 13, 2008?

Tuesday October 13

Important earnings on Tuesday include JNJ, INTC, and some smaller, but very important semi-conductor companies.

JNJ's quarter was highlighted by 4 critical acquisitions that exhibit the improvement in the capital markets. INTC and some other important semi-conductors will highlight the inventory re-stocking boost, demand from Asia, and provide insight toward corporations initiating the PC upgrade cycle - an excellent barometer for the condition of global corporations, which I believe is much stronger than being reported.

Wednesday October 14

MBA Mortgage Applications 7am: Last week's number was +16%. What is important this week is the effect a rise in long term yields had on Mortgage Apps. Expect any reversal back toward negative MBA Mortgage Application reports to encourage Washington to extend the $8,000 1st time homebuyer tax credit, which expires in November.

Retail Sales 8:30am: The month of September had two positive components. First, an extra week of sales due to the late Labor Day. In 2004, the last time the calendar provided this benefit, retail sales received a 200 basis point improvement due to the extra week. Second, an extremely cool start to September. A similar weather pattern occurred in 2006 and provided a 200 basis point improvement to sales.

Release of the FOMC minutes 2pm: Are we all on the same page boys and girls? - that's the focus of this report. I don't expect any surprises here.

On the earnings front some "best in breed" names report JPM, CSX and ABT - I like that lineup although not as much as Jeter, Damon, Tex, and ARod.

Thursday October 15

CPI and Initial Jobless Claims 8:30am

There is not expected to be any surprise here. Rather stagnant numbers. Last week's Jobless Claims came in at 521,000 while last month's CPI year on year was minus 1.5%. Investors should be watching for any unexpected significant changes from the previous numbers which would impact the U.S. Dollar and Treasuries.

On the earnings front, it is all about GS and C. Great job by Vikram Pandit scheduling C earnings on the same morning as GS.

Friday October 16

Industrial Production 9:15am: Last month was a 0.8% rise. A Reuter's survey is looking for a 0.1% rise this month. This number is a gauge of output at factories, mines, and utilities. A modest increase, similar to last month, signals growth without inflation.

University of Michigan Consumer Confidence 10am: Last month this figure rose to 73.5, its highest level since January 2008. Rather impressive considering current unemployment figures. Thompson Financial survey is looking for a similar number around 73. Personally, I would be surprised to see another figure as strong as last month's; let's hope I am wrong.

On the earnings front, GE and BAC report before the open. The market will also be responding to the Thursday October 15 post close GOOG report. If there is a "hurdle day," it looks like Friday.

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