Certainly an interesting (and telling) session Monday. After rallying sharply last Thursday and Friday on the back of an assumed announcement of some form of a budget deal very soon, talks seemed to regress some this weekend. U.S. stocks opened with a large gap down of about 1% at the open. However, after about 30 minutes buyers began to filter in and by 1 PM most indexes were back to unchanged. As the afternoon wore off, more buyers came in as there was talk of a 3 pm meeting between the parties. When that meeting fell through stocks fell some, but not a lot. The big takeaway is people have been burned repeatedly by these politicians, and most don't want to be out of the market for when the news hits of a deal, so there was a strong bid under the market. The S&P 500 added 0.41% and the NASDAQ 0.62%.
Looking ahead to this earnings season, S&P 500 companies are expected to post earnings growth of 4.2 percent in the quarter, down from the 8.5 percent rate that had been forecast on July 1, according to the latest data from Thomson Reuters data.
We mentioned last week if last Wednesday was the bottom, and the pattern of recent lows is copied there might be a period of 12-14 days of a rally ahead with almost no break. It need not be an exact copy as the catalyst for this rally is more news dependent, but just for kicks let's see if this is another repeat. This would be day 3. Unless this channel is violated back to the downside on the S&P 500 and NASDAQ one just assumes it will continue. That did not happen even with the gap down this morning.
The NYSE McClellan Oscillator remained in positive territory, a positive sign.
Netflix (NFLX), one of the "4 horsemen" had another strong day, as it rallied after the Wall Street Journal reported the company is in talks with several U.S. cable television companies to make its streaming video service available through set-top boxes. This chart was similar to the NASDAQ during the correction, briefly flirting with the 50 day moving average before staging a sharp reversal.
Solar stocks continue to be a place traders have set up shop, let by U.S. company Sunpower (SPWR).
A nice move by mega pharma company Pfizer (PFE) today:
On the losing side was Whirlpool (WHR), which had its projections cut by an analyst:
Longbow Research maintained its buy rating but cut its Q3 profit estimate by 25 cents to $2.50 a share and Q4 EPS by 15 cents to $3. It said weaker North American shipments in September will likely prevent Whirlpool from beating Q3 views or boosting guidance. Analysts' research found that customers were delaying purchases in late September and early October as the debt limit deadline neared without any signs of progress.
We will start to see some high profile earnings reports starting tomorrow so maybe it will deflect some attention away from D.C.