Monday was a quiet session as traders mostly stayed sidelined ahead of the Presidential election. A rally in the afternoon took stocks off the morning lows and the major indexes finished with modest gains; the S&P 500 added 0.22% and the NASDAQ 0.59%. The only major economic report of the day was the ISM Non Manufacturing report which came in a bit light, but still in expansionary mode - it had little effect on the market.
- The Institute for Supply Management said its gauge of nonmanufacturing activity declined to 54.2 in October from 55.1 in September. Economists surveyed by MarketWatch expected the index to decline to 54.5. Readings above 50% indicate expansion.
- Of key components, the new-orders index, a sign of future demand, fell to 54.8 from 57.7. The business activity/production index declined to 55.4 from 59.9. Meanwhile, the employment component rose to 54.9 from 51.1.
The major indexes continue to trade in a relatively tight range after some steep drops a few weeks ago. I've added the 100 day moving average (blue line) to the S&P 500 to better illustrate what it is bouncing off of - it best replicates the 20 WEEK moving average which has been key support for that index the past two weeks. You can see aside from the headfake Thursday and Friday morning this level has been the floor while the April 2012 highs of 1422 has been the ceiling. Until the S&P 500 moves out of this range for more than a day or two there is little to do or see.
The NASDAQ was led by Apple which reported solid sales of iPads this past weekend, which pushed the stock out of another day of selling to a positive note in premarket.
Semiconductors also helped the NASDAQ Monday; this has been one of the most beaten down sectors of the past few months - if this is something more than a dead cat bounce, it would be a positive for the market.
All in all, a quiet session and a week without a lot of economic data - expect a knee jerk reaction to whomever wins the election and then technical analysis to dominate the movement of the market. The inability to sustain rallies remains troubling, as does the ability to create new highs. At this point it seems like the market is consolidating recent losses before a new leg begins.
Speaking of Apple, did you realize they only paid 1.9% in corporate taxes outside the U.S. in its fiscal 2012 year? It's good to be a global multinational who knows every loophole on Earth. If only we could all become multinational corporations, our lives sure would be easier - or at least full of more money. Double Irish with a Dutch Sandwich anyone? Yummy....
- The world's most valuable company paid $713 million in tax on foreign earnings of $36.8 billion in the fiscal year ended Sept. 29, according to the financial statement filed on Oct. 31. The foreign earnings were up 53 percent from fiscal 2011, when Apple earned $24 billion outside the U.S. and paid income tax of 2.5 percent on it.
- Apple may pay some income taxes on its profit to the country in which it sells its products, but it minimizes them by using various accounting moves to shift profits to countries with low tax rates. For example the strategy known as "Double Irish With a Dutch Sandwich," routes profits through Irish and Dutch subsidiaries and then to the Caribbean