S&P 500; US Indexes Fundamental Daily Forecast – It’s Going to Take a Major Surprise to Derail This Rally

The major U.S. stock indexes are expected to open higher on Wednesday based on the pre-market trade. During the early session, the indexes were buying on yesterday’s strong rally.

At 1327 GMT, the benchmark S&P 500 Index is trading up 2.50 or +0.10%. The blue chip Dow Jones Industrial Average is up 73 or +0.31% and the tech-based NASDAQ-100 Index is up 1.50 or +0.02%.

Yesterday, U.S. equities soared after news broke that the Senate took a step towards passing a bill aimed at reforming the U.S. tax code. The proposed tax bill passed through the Senate Budget Committee, bringing the upper chamber closer to a floor vote. This vote is expected to take place on November 30.

Yesterday, investors showed minimal reaction to the news of a North Korean missile launch. We could see a more pronounced reaction once the United States announces its official response. It is possible that investors won’t show any reaction unless there is actually a response from the U.S. military. If that would occur then investors would dump stock and move money into safe haven assets like Treasurys, gold and the Japanese Yen.

Later today, investors will get the opportunity to react to U.S. economic data on Preliminary GDP, Pending Home Sales and the Fed’s Beige Book. FOMC Member William Dudley is also scheduled to peak. The main market moving event is likely to be the testimony of Fed Chair Janet Yellen.

Yellen could move the markets with remarks on monetary policy, interest rates and inflation, but it’s going to take an extreme view on these three issues to move the stock market. She is going to have to be extremely hawkish or extremely dovish to generate a meaningful reaction in the stock market.

A new worry for investors is a possible government shutdown on December 8. It’s not likely to be an urgent matter this week so I don’t expect much of a reaction. However, if it looks like it’s going to come down to the wire, equity markets may start to feel downside pressure.

Basically, I’m looking for the rallies to continue because of the strong technical upside momentum. The only way to derail the rally at this point is with an event that hits investors as a complete surprise. It could be anything:  military action against North Korean, an extremely hawkish Yellen, and another delay in tax reform.