S&P 500; US Indexes Fundamental Forecast – January 19, 2017

U.S. equities closed mixed on Wednesday as investors digested economic reports, earnings data and remarks by Fed Chair Janet Yellen. Uncertainty over President-elect Donald Trump’s ability to run a government also continued to keep a lid on any major rallies.

In the cash market, the benchmark S&P 500 index closed at 2271.89, up 4.00 or +0.18%. The blue chip Dow Jones Industrial Average finished lower at 19804.72, declining 22.05 or -0.115. The NASDAQ Composite rebounded after Tuesday’s weakness, closing at 5554.55, up 15.82 or +0.28%.

In economic data, the U.S. Consumer Price Index rose 0.3 percent, in line with expectations. Annualized, the CPI figure was 2.1 percent. This is the first time the index is over the 2.0 level since the summer of 2014.

U.S. industrial production came in 0.8 percent higher in December and the NAHB survey for January showed a slight decline in homebuilder sentiment.

Late in the session, the Fed Beige book showed a pickup in manufacturing, “widespread” reports of labor shortages and improving business investment helped convince the Fed to raise rates in December.

Also on Wednesday, Fed Chair Janet Yellen said in prepared remarks that the U.S. economy is closing in on the central bank’s goals. “Right now our foot is still pressing the gas pedal, though, as I noted, we have eased back a bit,” Yellen said.

Forecast

Thursday is filled with a slew of economic data and Fed speakers, however, market participants have been largely focused on President-elect Donald Trump’s plans for fiscal stimulus, deregulation of certain sectors and tax reform. With his inauguration on Friday, Trump can no longer promise economic stimulus, he has to deliver. The recent price action suggests investors may be running out of patience with his act.

In the U.S. on Thursday, investors will get the opportunity to react to the latest data on Building Permits, Philadelphia Manufacturing, Weekly Unemployment Claims and Housing Starts.

Fed speakers include Williams, Rosengren and Yellen.

Earnings reports include Union Pacific, American Express and IBM.

I’m looking for volume to come in low on Thursday and the trading range tight with minimal reaction to the economic and earnings reports as investors continue to express concerns over Trump’s ability to run the government. We could be range bound until Trump reveals more details about his plans to rebuild America.