S&P 500; US Indexes Fundamental Daily Forecast – Pay Attention to U.S. Durable Goods Report

The major U.S. equity indexes rose to record highs on Tuesday, bolstered by a solid rally in the tech sector and strong quarterly results from several major corporations. A 1.9 percent rise in Apple helped drive the Technology Select Sector exchange-traded fund (XLK) 1 percent higher to a 17-year high. The stock also gave the Dow Jones Industrial Average and S&P 500 Index higher. Large-cap tech stocks like Facebook, Amazon, Netflix and Alphabet all closed higher.

In the cash market, the benchmark S&P 500 Index settled at 2599.03, up 16.89 or +0.65%. The blue chip Dow Jones Industrial Average finished at 23590.83, up 160.50 or +0.68% and the tech-based NASDAQ Composite ended the session at 6859.00, up 68.29 or +1.00%.

U.S. home sales grew more than expected in October as hurricane-related disruptions dissipated, but a lingering shortage of houses continued to make homes unaffordable for some first-time buyers.

The National Association of Realtors said on Tuesday that existing home sales rose 2.0 percent to a seasonally adjusted annual rate of 5.48 million units last month. September’s sales pace was revised down to 5.37 million units from the previously reported 5.39 million units. Economists were looking for a 0.7 percent rise to 5.42 million-unit rate in October.

Late Tuesday, Fed Chair Janet Yellen said on Tuesday that the Federal Reserve is “reasonably close” to its goals and should keep gradually raising the U.S. interest rates to avoid the dual pitfalls of letting inflation drift below target for too long, and of driving unemployment down too far.

Forecast

The early trade indicates U.S. equity indexes will open mixed to slightly higher on Wednesday. Traders are gearing up for another session which features fresh economic data and the minutes from the U.S. Federal Reserve’s November meeting.

During the U.S. trading session, investors will get the opportunity to react to the latest data on Durable Goods, Weekly Unemployment Claims and Revised University of Michigan Consumer sentiment.

Core Durable Goods Orders and Durable Goods Orders are expected to show a 0.4% increase. Weekly Unemployment Claims will be released a day earlier because of the holiday. It is expected to come in at 241K. Revised University of Michigan Consumer Sentiment is expected to rise slightly to 98.2.

The Fed minutes from its November meeting will be released at 1900 GMT. They could provide signals on U.S. monetary policy. The Fed rate hike in December is roughly priced in and unless they are extremely hawkish, investors will be looking for more information on the timing and frequency of future rate hikes in 2018 and 2019.

One concern for investors remains the tax code overhaul. On Monday, U.S. President Donald Trump said before a Cabinet meeting that the administration was going to “give the American people a huge tax cut for Christmas”, according to the Associated Press.

Concerns still linger on Wall Street as to whether a deal will come about and finalized by the end of the year, however.

It’s hard to call the price action today especially since I didn’t expect to see two solid days of gains. All I can say is I expect extremely low volume today. Additionally, the major mutual funds and institutions are expected to remain on the sidelines. Nonetheless, the indexes will remain susceptible to wild swings due to the absence of a stopper.

I also feel that when the major players return next week, they are not going to want buy strength. Therefore, gains could be limited today and Friday and we may actually erase much of yesterday’s gains today.