Earnings Season Gets Off to a Good Start, but Retail Sales Weak

October 16, 2019

STOCK INDEX FUTURES

U.S. stock index futures were sharply higher yesterday after the third-quarter earnings season got off to an upbeat start. Of the 11 S&P 500 companies that reported earnings before the bell on Tuesday there were only two that missed estimates.

Analysts may have to revise their estimate that earnings for S&P 500 companies for the quarter will decline 3.2% from a year ago.

U.S. stock index futures are weaker today due to concerns over U.S.-China tensions. There was additional pressure when a report showed U.S. retail sales fell a seasonally adjusted 0.3% in September from a month earlier when an increase of 0.3% was expected. Retail sales, excluding autos, were down 0.1% in September when an increase of 0.2% was anticipated.

There are three 9:00 central time reports. The October Atlanta Federal Reserve business inflation expectations report is estimated to show 2.0% and August business inventories are expected to be up 0.3%. The October housing market index is estimated to be 68.

At 1:00 central time the Federal Open Market Committee will release its Beige Book on the economy. This book is produced approximately two weeks before the monetary policy meetings of the FOMC.

My view remains that the global reflation scenario is on track and easier credit conditions from most of the worlds central banks, including the Federal Reserve, are coming and will be the dominant fundamental that supports stock index futures in the long term.

CURRENCY FUTURES

The U.S. dollar was higher in the overnight trade. However, the greenback came under pressure when the weaker than expected retail sales report was released.

In the longer term, the U.S. dollar is likely to trend higher against other major currencies, since interest rate differential expectations remain slightly bullish for the greenback.

The British pound is higher after a report showed inflation in the U.K. held steady in September. The Office for National Statistics said consumer prices rose 1.7% on the year last month, which was the same annual rate as in August.

Canada's consumer price index increased 1.9% on a year-over-year basis in September, which met market expectations.

INTEREST RATE MARKET FUTURES

Futures advanced when the decline in U.S. retail sales was reported.

Federal Reserve speakers today are Dallas Federal Reserve Bank PresidentRobert Kaplan at 12:00 and Federal Reserve Member of the Board of GovernorsLael Brainardat 2:00.

Market participants believe there is an 85% probability that the Federal Open Market Committee will lower its fed funds rate by another 25 basis points at the October 30 policy meeting. The probability yesterday was 72%.

In the longer term, higher prices are likely for futures, especially at the long end of the curve, as most major central banks, including the Federal Reserve, are under pressure to become more accommodative.

SUPPORT AND RESISTANCE

December 19S&P 500

Support 2980.00 Resistance 3000.00

December 19 U.S. Dollar Index

Support 97.800 Resistance 98.200

December 19Euro Currency

Support 1.10600 Resistance 1.11170

December 19Japanese Yen

Support .92140 Resistance .92510

December 19Canadian Dollar

Support .75410 Resistance .75850

December 19Australian Dollar

Support .6728 Resistance .6777

December 19 Thirty Year Treasury Bonds

Support 159^26 Resistance 161^0

December 19Gold

Support 1480.0 Resistance 1498.0

December 19Copper

Support 2.5700 Resistance 2.6200

December 19 Crude Oil

Support 52.45 Resistance 53.55

Contact Alan for more extensive information on these markets at 312.242.7911 or via email at alan.bush@admis.com. Thank you.

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