S&P 500; US Indexes Fundamental Forecast – November 1, 2016

U.S. stocks tossed and turned inside a range on Monday as investors remained on edge due to concerns over the investigation into Hillary Clinton’s emails. Also weighing on prices was low volume ahead of the start of the Fed’s two-day meeting on Tuesday and Wednesday.

In the cash market, the benchmark S&P 500 closed at 2126.15, down -0.26 or -0.01%. The blue chip Dow Jones Industrial Average finished at 18142.42, down 18.77 or -0.10%. The tech-based NASDAQ Composite ended at 5189.35, down 0.75 or -0.01%.

The active December E-mini S&P 500 Index closed the session at 2120.00, down 3.75 or -0.18%.

Volume was extremely light on Monday with the cash market Dow posting its narrowest range since September 7 and the third-narrowest since of 2016.

The Dow and S&P also finished lower for a third consecutive month, while the NASDAQ Composite ended its three-month winning streak.

There was economic news on Monday, however, the primary concern for investors was the Clinton emails and the Fed meeting. The reports were mixed, but this shouldn’t influence the Fed. According to the Commerce Department, consumer spending increased 0.5 percent, bouncing back from the previous 0.1 percent drop in August.

The Chicago PMI for October came in at 50.6, well below the 54.1 estimate and September’s 54.2 read. The Dallas Fed manufacturing survey showed a print of 6.7 for October, below a 16.7 read in September.

Forecast

Traders still expect Clinton to win the presidential election on Tuesday, November 8. Otherwise, U.S. stocks would have been sharply lower on Monday. The FBI’s investigation into Clinton’s emails has raised doubts, however. And investors don’t like doubt. Therefore, I don’t expect to see a lot of aggressive buying from now until the election. If the FBI drops the investigation, we could see a relief rally.

On Wednesday, the Fed is widely expected to leave interest rates unchanged. However, investors will be more interested in the Fed’s statement. They want to language that the Fed is on-track to raise rates in December. I’m not sure stock investors are going to like another month or two of ambiguous language.

With expectations for a rate hike at about 73% and the markets relatively steady, I don’t think it’s going to be too much of a shock if the Fed decides to raise rates.

I’m looking for more two-sided trading on Tuesday. I don’t think investors want to step in front of the Fed and the election so traders are likely to make a market over the next week. Also investors remember what the polls showed ahead of Brexit and don’t want to get caught in a big way on the wrong side of the market.

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