Markets Shrug Off DC Worries And Focus On Positive Earnings Data
The markets finished strongly on Friday, capping off another great week with new all-time highs.
In spite of all the political drama last week with the spending bill deadline, the market shrugged it off and continued to power higher.
At the time of this writing, all we know is that the House passed a spending bill on Thursday, and that the Senate was to take a vote on a spending bill Friday evening.
After lots of grandstanding, press conferences, and White House meetings, the tension was high, but the markets didn't seem to care.
And in the grand scheme of things, it makes perfect sense. Even if they did shut the government down, it would only be a temporary thing. And it likely would have only a minimal impact, or even zero impact on businesses. Given that, aside from the political outrage, if there's no effect on businesses, then stocks shouldn't go down just because the politicos in DC can't get their act together for a few days.
Now, if today we see that a deal was not reached over the weekend and the government did shut down, we'll have to see how the market responds. But the price action last week, as it looked like we were indeed at an impasse, spoke loudly. And the message was, there's too much positive stuff in the market right now to let short-term petty politics derail it.
In other news, Friday's Consumer Sentiment report came in at 94.4, just under the previous month's reading of 95.9. While the current conditions component dipped last month (no doubt being influenced by the spending bill fight), the expectations component was 'healthy' with the year-ahead expectations at nearly a two-year high.
It will be interesting to see how the spending bill debate gets resolved (if it isn't resolved already).
But the market seems more focused on real stock news. And with earnings estimates on the rise, especially as analysts race to factor in how the tax cuts will improve companies bottom lines, the market looks poised to add to their gains.
See you tomorrow,
Kevin Matras
Executive Vice President, Zacks Investment Research
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