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Market Moves You Need to See
Kevin Matras   
Profit from the Pros
By Kevin Matras
Executive Vice President
Zacks Investment Research

Stocks End Mixed, Treasury Yields Continue To Rise, Inflation Report On Deck For Tomorrow

Stocks closed mixed yesterday with the Dow down modestly, and the S&P and Nasdaq up modestly.

Treasury yields rose again with the 10-year hitting 4.625%, its highest level in 16 years.

In other news, yesterday's MBA Mortgage Applications fell -1.3% w/w with purchases down -1.5%, and refi's down -0.9%.

Durable Goods Orders rose 0.2% m/m vs. last month's -5.6% and views for -0.3%. Ex-Transportation it was up 0.4% vs. last month's 0.1% and estimates for 0.2%, while Core Capital Goods were up 0.9% vs. last month's -0.4%.

The Survey of Business Uncertainty showed U.S. firms expect sales growth to rise 4.30% over the next 12 months, up from last month's forecast of 4.15%. Employment Growth came in at 4.16%, but was slightly lower than last month's 4.29%.

And the State Street Investor Confidence Index rose 0.9 points to 108.7 vs. last month's 107.8. The Asian component increased by 11.0 points to 112.6. North America was up 0.8 points at 104.7. But the European component was down -6.2 points at 97.5.

Today we'll get the third and final estimate for Q2 GDP, Weekly Jobless Claims, Pending Home Sales, the Kansas City Fed Manufacturing Index, and Corporate Profits.

We'll also hear from Federal Reserve Bank of Chicago, President and CEO, Austan Goolsbee as he delivers a policy speech, and will participate in a Q&A at the Peterson Institute for International Economics in Washington, DC.

And we'll hear from Fed Chairman, Jerome Powell, as he will host a town hall with educators, and take questions from the audience.

No new ground is expected to be broken at Mr. Goolsbee's event or Mr. Powell's. Nonetheless, Fed watchers will still be listening.

But what everyone is really waiting for this week is Friday's Personal Consumption Expenditures (PCE) index. This is the Fed's preferred inflation gauge.

Last month's PCE report showed the headline number increasing to 3.3% y/y vs. the previous reading of 3.0%, while the core rate (ex-food & energy) was up 4.2% y/y vs. the previous month's 4.1%.

Tomorrow's PCE report is expected to show a mixed bag with headline inflation up 0.5% m/m, and 3.5% y/y (which would be an increase from the last report's 3.3%). The core rate is expected to be up 0.2% m/m, but the y/y rate is expected to come it at 3.9%, which would be down from the last reported 4.2%.

Today marks day 14 of the autoworkers strike.

We now have just 3 more days for Congress to get a budget deal done by the end of the month to avoid a government shutdown.

And there's only 2 more trading days left in this month. (Good riddance.)

But as I've been mentioning, the statistical odds of a rally in Q4 are pretty compelling. History shows if the market is up more than 10% thru July, and August is down, the remainder of the year is up 100% of the time with an average gain of 9.9% (median of 8.7%).

Regardless of how September finishes, next week starts a new month and a new quarter. And given the above stats, the probabilities definitely favor the bulls.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research


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