S&P 500; US Indexes Fundamental Forecast – October 27, 2016

U.S. equity indices closed mixed on Wednesday with the market repeating a pattern we have seen several times over the past few weeks. The pattern involves moving sharply in one direction early in the session then reversing to the other direction later in the session. I believe this is called “making a market”. It usually indicates investor indecision or as the case may be investor indifference.

On Wednesday, the markets were pressured lower following the previous day’s steep sell-off. The catalyst behind the initial weakness was a bearish earnings report from Apple.

In the cash market, the benchmark S&P 500 Index closed at 2139.43, down 3.73 or -0.17%. The benchmark Dow came in at 18199.13, up 30.06 or +0.17%. The NASDAQ Composite finished at 5250.05, down 33.35 or -0.63%. December E-mini S&P 500 Index futures ended the session at 2134.00, down 4.00 or -0.18%.

The price action was manipulated by earnings, economic data and commodity prices.

Boeing contributed the most to the gains while Apple contributed to most of the losses. It lost about 2.25%. This number affected all three major indices. For example, Apple’s loss on Wednesday took about 20 points off the Dow.

In economic news, the October Services PMI Index jumped to 54.8 from 52.3, while New Home Sales rose 3.1 percent in September. Finally, mortgage applications fell 4.1 percent last week, despite lower mortgage rates.

Crude oil had a volatile session on Wednesday in reaction to a bearish American Petroleum Institute’s inventories report and a somewhat bullish U.S. Energy Information Administration’s weekly inventories data. At the end of the day, oil was lower, however, because of developing problems with OPEC production cut deal. The oil sector weakened on the news, taking a few points off the Dow and S&P 500 Index.

Forecast

I don’t expect to see much change today in the price action of the major indices. Traders are likely to continue “making a market” until after the election.

Today, traders will get the chance to several minor reports including Durable Goods Orders and Pending Home Sales.

The major reports are Core Durable Goods and Weekly Unemployment Claims. The former is expected to show a 0.2% gain.

The key report this week is Friday’s Advance GDP. This is important enough to sway the Fed’s interest rate decision.

Check out our real-time Economic Calendar