Back to top

Image: Bigstock

Dust Settles on Election, Q3 Earnings

Read MoreHide Full Article

Monday, November 14, 2016

Following the best week in the Dow for the past five years, market futures are relatively tepid early this Monday. The immense relief rally that followed the year-and-a-half-long marathon of the U.S. General Election, and the subsequent hopefulness in the Pharma, Finance and Construction spaces from a President Trump administration helped markets rise “bigly” last week.

Further, we saw the Volatility Index (VIX) fall precipitously in the week, tumbling to its third-largest weekly drop in history (the steepest week-long drop was the week following Great Britain’s Brexit vote). Meanwhile, the 10-year bond yield shot up to its highest level since the beginning of the year, and continues to ride higher this morning at over 2.2%. The 10-year had been wallowing in 1.7% territory throughout most of the summer. Yields are rising at the same time the stock market is rising — how long can we expect this to last?

Also, Q3 winds down ahead of holiday season, with just 21 S&P 500 companies remaining to report this week, mostly in big-box retail. Earnings from companies like Home Depot (HD - Free Report) Tuesday, Cisco (CSCO - Free Report) and Target (TGT - Free Report) Wednesday, Wal-Mart (WMT - Free Report) Thursday and Foot Locker (FL - Free Report) Friday are some of the biggest names we expect to be hearing from this week.

Q3 earnings season will have been the first quarter in the the last six to bring positive earnings results in aggregate, breaking a five-quarters-long earnings recession in the U.S. In other words, the last time before Q3 2016 we saw positive earnings results was back before the presidential election had gotten underway.

Looking ahead, we do see weakness in the oil market. An OPEC meeting scheduled for later this month appears to have its work cut out for itself, at least in terms of oil-rich nations agreeing to cut back production and work down the global supply glut that has created headwinds for the market over the past year-plus. Ahead of today’s bell, we see the WTI -1.1% and Brent crude -0.9%.

Market indices had been mixed earlier this morning, but a half-hour before the opening bell we are again in positive territory: S&P 500 +6.5, Dow +73 and Nasdaq +0.25. The tech-heavy Nasdaq has seen the most pressure since Donald Trump won the election, as tech services and manufacturing being heavily reliant on Asian markets look to have the toughest time fighting through new presidential policies.

Mark Vickery
Senior Editor

Click here to follow this author>>