Financial Market Analysis
By Shawn R. Carpenter
Wednesday, July 05, 2006
Abundant news on 4th of July weekend...
International issues rule the day!!
We have our plates full with international escalation issues that are effecting not only the US, but the rest of the world. First of all, we have the North Korean missile issue. While our main concern with N. Korea was the belief that they obtain the technology to deliver a missile that could land within the United States, it was short lived. Many missiles were launched, but the real one everyone was interested in only logged a mere 40 seconds of flight time. Bottomline... N. Korea has a long way to go before they could deliver a nuclear payload to the mainland US. Negotiations will be needed though in order to quell N. Korea from harming Japan, South Korea, and other neighbors.
Also, the tensions in Israel and Palestine continue to escalate. The tone of this situation resembles a war stance by both sides. This could escalate fear among the world as this might spread across the region.
With this said, the US market is holding steady. The biggest catalyst, barring any escalation in the international realm, will be the earnings season right around the corner. Right now, the S&P 500 is looking like earnings will grow by 9.7%, up from 9.5% last week. What does this mean? People are spending money and not affected by the high price of gasoline, even during the peak summer driving period. The Fed might continue to raise rates, yet the decline in the recent PPI number (July ex-food/energy was 1.66%, down from 2.83% a year ago) may give them more incentive to stall a hike in rates and give them more room down the road to react.
What does all this mean for the markets? Hold tight for now. The chart above is the SPY (S&P 500 ETF). Recent price action has hit the 50% retracement of the recent downtrend. A good earnings season, again barring any escalation on the international front, should provide a rally for the market and enable the multi-year rally to remain intact. A bad earnings season (possibly with poor forward guidance) coupled with possible escalation on the international front will spell bad news for the markets and should push money into treasuries, energy, commodities, or other sources of investment potential such as the Consumer Staples Sector (chart above). ¶ 8:59:00 PM
International issues rule the day!!
We have our plates full with international escalation issues that are effecting not only the US, but the rest of the world. First of all, we have the North Korean missile issue. While our main concern with N. Korea was the belief that they obtain the technology to deliver a missile that could land within the United States, it was short lived. Many missiles were launched, but the real one everyone was interested in only logged a mere 40 seconds of flight time. Bottomline... N. Korea has a long way to go before they could deliver a nuclear payload to the mainland US. Negotiations will be needed though in order to quell N. Korea from harming Japan, South Korea, and other neighbors.
Also, the tensions in Israel and Palestine continue to escalate. The tone of this situation resembles a war stance by both sides. This could escalate fear among the world as this might spread across the region.
With this said, the US market is holding steady. The biggest catalyst, barring any escalation in the international realm, will be the earnings season right around the corner. Right now, the S&P 500 is looking like earnings will grow by 9.7%, up from 9.5% last week. What does this mean? People are spending money and not affected by the high price of gasoline, even during the peak summer driving period. The Fed might continue to raise rates, yet the decline in the recent PPI number (July ex-food/energy was 1.66%, down from 2.83% a year ago) may give them more incentive to stall a hike in rates and give them more room down the road to react.
What does all this mean for the markets? Hold tight for now. The chart above is the SPY (S&P 500 ETF). Recent price action has hit the 50% retracement of the recent downtrend. A good earnings season, again barring any escalation on the international front, should provide a rally for the market and enable the multi-year rally to remain intact. A bad earnings season (possibly with poor forward guidance) coupled with possible escalation on the international front will spell bad news for the markets and should push money into treasuries, energy, commodities, or other sources of investment potential such as the Consumer Staples Sector (chart above). ¶ 8:59:00 PM
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