Disney Earnings, Falling Oil And Chairman Powell

Interval training is a process by which individuals doing multiple sets, push themselves as hard as they can for short bursts, then rest for a longer period of time between sets. That's how I'm thinking about the market this week. After a flurry of activity last week, this week has been a period of rest.

 

On Tuesday, the S&P 500 gained 0.3% while the Nasdaq Composite moved higher by 0.9%.

On a year-to-date basis, the S&P 500 is up 14% after stringing together seven consecutive days of gains. Meanwhile, the Nasdaq, after a tumultuous patch, is up 30% for the year and has been up eight days in a row. Both indices are past much of the potential headwinds earnings season could have caused but didn't. The same is true for much of the most recent economic data.

 

If there is one word that has hung over markets all year, it's inflation. We've seen forecasts spanning a range from the Fed increasing rates to the Fed cutting rates. According to the CME, chances of a rate hike in December are just under 10%. Probabilities favor rates staying at their current levels until May of next year at which point there are hopes for a rate cut. Personally, I have about as much faith in forecasts beyond the next meeting as I do in Chicago weather forecasts beyond today. However, it seems the idea of rates remaining at current levels for the foreseeable future is the prevailing consensus and markets appear okay with that.

 

One of the reasons I think we're seeing worries over inflation begin to subside is oil. In late September, oil hit a high of $95 per barrel and there were fears we would soon break above $100. Since then; however, oil has been in a bit of a freefall. In premarket, crude oil futures are trading well below $76.50, down nearly 1.5%. That has helped push down prices of gasoline which, according to AAA, are down $0.30 since just last month.

 

This morning, Fed Chairman Powell will be speaking, and he'll then speak again tomorrow as well. There is little in the way of economic data this week, so I don't expect his message to change much between today and tomorrow. Still, I'm interested in hearing his thoughts on where the economy stands in light of last week's weaker than expected jobs report. There are also three other Fed members speaking today. I would imagine by the end of the day, we'll have a pretty good feel for what they are all thinking with respect to interest rates.

 

Although the bulk of earnings season is over, after the close today, Disney DIS will report. As I mentioned on Monday, this is a company whose stock has been stuck in a mouse trap for the better part of the year and I'm interested to hear what Bob Iger has to say. The company recently acquired the remaining share of Hulu and they are also set to launch their new sportsbook, ESPN BET, next week.

 

A couple other odds and ends include Goldman Sachs GS and Ebay EBAY. Goldman announced they are looking to unload their GM credit card program after having launched the program less than two years ago. Goldman's foray into retail lending has not worked out well, to put it diplomatically and the company has been trying to rid itself of its retail lending arm as quickly as Chicago Bears fans are looking to get rid of head coach Matt Eberflus. Overnight, Ebay reported earnings and issued a weaker than expected 4^th quarter outlook. That stock is down 7.5% in premarket.

 

For today, futures are relatively flat in premarket trading. Bonds have extended their rally from last week, pushing interest rates lower. The yield on the ten-year note is at 4.56%, well off the 5% high we saw recently. The VIX is below 15 and has been down for seven consecutive days. I'm watching the S&P 500 to see if it can break above 4,400 and if the Nasdaq Composite can push past 13,700. Both those levels could be potential technical hurdles. As always, I would stick with your investing strategy and long term plans.