S&P 500; US Indexes Fundamental Forecast – April 27, 2017

U.S. stocks rose early in the session on Wednesday, but investors couldn’t hold onto the gains after the release of a largely disappointing tax reform plan from President Trump. Better-than-expected earnings reports gave the major indexes a boost shortly after the opening, but then prices retreated after Trump’s tax plan failed to reveal anything new.

In the cash market, the blue chip Dow Jones Industrial Average closed the session at 20975.09, down 21.03 or -0.10%. The benchmark S&P 500 Index finished at 2387.45, down 1.16 or -0.05% and the tech-based NASDAQ-100 Index came in higher at 6025.79, up 0.30 or +0.00%.

Forecast

The direction of the stock market today will likely be determined by earnings reports. I think the reaction to the tax plan was just an excuse for investors to book profits after a prolonged rally. The tax plan was simply an outline, in my opinion, and there is likely to be much discussion around this plan. So the price action on Wednesday was likely a knee-jerk reaction and not necessarily how investors really feel about Trump’s plan to cut corporate taxes. There are just too many details that still have to be worked out before investors can make an informed decision.

Today is being called “Big Tech Thursday” because investors are going to get blasted with several key earnings reports before and after the opening.

Before the opening, investors will get the opportunity to react to the latest earnings results from Union Pacific, Bristol-Myers Squibb, Ford, American Airlines, Comcast, Dow Chemical, Raytheon and Deutsche Bank.

However, the big news is likely to come after the close with reports due from Amazon.com, Alphabet, Microsoft, Intel and Starbucks. These reports are more likely to set the tone of the market on Friday.

Simply put, I think investors are ready to move on from tax reform and back into earnings. However, there are still risks. We could hear more talk about the resolution to keep the government funded by Friday.

Although there have been reports this week that negotiations between Republicans and Democrats have been going smoothly, there is always the possibility of a snag as we approach Friday’s deadline.