The Day Ahead: Equity Rally Fizzles
Thursday's stock rally isn't being sustained in early trading: equity futures in the U.S. are pointing downwards and European markets are in modest sell-off
"Enthusiasm, so evident yesterday with the huge market rallies seen around the world, appears to have a taken a backseat to the question 'How on earth is all of this going to work?'" said BMO Capital Markets. They called the plan outline "amazing" but added: "the details, or the implementation of the grand plan, will be extremely difficult to carry out. For example, how does one generate outside interest to buy into a special purpose vehicle?"
S&P 500 futures are 7.5 points lower at 1,275.10 and Dow futures are 61 points off at 12,107.
Treasuries are benefiting but only slightly. The 10-year Treasury yield is lower at 2.34% and the 30-year yield is also lower at 3.40%.
Meantime, light crude oil fell 1.82% overnight to $92.25 per barrel; gold prices fell 0.47% to $1,739.60 per ounce.
Key Events Today:
8:30 - The Personal Income & Outlays report is anticipated to show incomes rising 0.3% in September and consumption climbing 0.6%. In August, income fell back 0.1% and consumption only grew 0.2%. The payrolls report suggested private wages and salaries are rising, and other reports indicate retail spending grew and including a jump in vehicle purchases.
"The consumer sector seemed to have bounced back sharply in September," said Citigroup. "The employment report featured gains in payrolls, the workweek and hourly earnings, signaling a jump in wages and salaries. Consumer spending probably posted a solid gain, led by a big rebound in motor vehicle purchases."
Meantime, the core PCE price index - the Fed's preferred inflation measure - is expected to increase 0.1% in September, putting the year-over-year rate at 1.7%
"Higher core inflation earlier this year is one reason that the Federal Reserve is being more cautious about adding more monetary stimulus than it was in 2010, when deflationary risks were high," IHS Global Insight said. "A 0.1% monthly pace of core inflation in September (just the same as in August), suggests that core inflation is abating."
9:55 - Consumer Sentiment is expected to rise just half a point from the mid-month reading to 58, although estimates from economists go as high as 62. The mid-month reading was a two-month low; back in May, the index was at 71.5 .
"Consumer sentiment surprisingly declined in early October," said Nomura Global Economics. "Since that time, volatility in financial markets has remained elevated, but high-frequency labor market indicators have improved."
"Normally, factors such as jobless claims, gas prices and equity market performance tend to drive changes in consumer sentiment," Citigroup added. "But these factors have been poor predictors of attitudes lately. Instead consumer sentiment seems to be driven by more subjective forces, especially the perceived dysfunction in Washington."