Chipping away. Markets closed mixed yesterday after having an emotional morning. Yesterday’s session started out with solid earnings but for an interview with White House Economic Advisor Wilbur Ross in which he said that a Chinese - US deal was “miles and miles away”. Markets didn’t like that, as one might suspect. Federal workers probably didn’t like Ross’ suggestion that they borrow money to cover missed paychecks as a result of the shutdown. Speaking of the shutdown, the Senate voted down two budget proposals yesterday which was largely expected. The good news is that both parties along with the President seem to be sending some signs that they are willing to ease their respective requirements to reach a deal. My regular readers know that I am not a fan of hope as a strategy, but in this case I am willing to make a concession and say that we should have hope that a resolution can be reached. Not only for the federal workers but also for the economy which needs to be treated gingerly in the quarters ahead. More and more dialogue is beginning to surface regarding an upcoming economic slowdown. It can be heard in corporate earnings releases, despite relatively good Q4 earnings. It can also be heard by a growing group of analysts who have been slowly but methodically lowering their growth estimates for the year. For now earnings still look solid which ultimately created a tailwind in yesterday’s stock markets, which flip flopped between black and red, but ultimately caused a positive close for all but the Dow Jones which fell by a mere -0.09%. The S&P 500 closed up by +0.14%, the Russell 2000 rose by +0.7%, and the NASDAQ 100 climbed by +0.66%. Chipmakers had a solid day resulting from positive earnings as the semiconductor index rose by +5.89%, though Intel had a big miss after the bell, which will have an effect on today’s trade as it was off by -5.5% in the pre market. Starbucks also announced earnings after the bell with a beat causing the stock to trade up by +3.6% in the pre market. Also yesterday, the European Central bank announced its policy keeping rates unchanged. The move was largely expected as was the dialog that risks of a global slowdown are being carefully considered by the central bankers. While all the slowdown talk that is emerging may not appear to be having an affect on the equity markets, it certainly can be seen more prominently in the bond markets which rose yesterday. The ten year yield to maturity fell to around 2.71% from 2.74% during the session. The 2 year - 10 year yield curve flattened to 15 basis points.
Today’s Durable Goods Orders as well as New Home Sales numbers have been postponed due to the government shutdown. That leaves us with earnings, which are light because it is Friday. We will get builder D.R. Horton and Colgate-Palmolive before the bell for some data points. Next week’s economic releases are mostly up in the air as a result of the shutdown however we will get Consumer Confidence, which will be looked at quite closely. We will also have another packed week of earnings to contend with, giving traders plenty to contemplate. Have a great weekend and please call me if you have any questions.