S&P 500; US Indexes Fundamental Forecast – October 13, 2016

U.S. stocks were primarily rangebound on Wednesday as investors stood on the sidelines both before and after the release of the minutes of the last Fed meeting in September. When the session ended, the major indices were mixed as the minutes basically affirmed previous expectations for a possible December rate hike.

In the cash market, the benchmark S&P 500 closed 2.45% higher at 2139.18. The Blue Chip Dow Jones Industrial Average finished at 18144.20, up 15.54 or +0.09%. The tech-based NASDAQ Composite closed at 5241.36, down -5.43 or -0.10%. The popular December E-mini S&P 500 Index finished at 2131.50, down 3.00 or -0.14%.

Despite the posturing both before and after the Fed minutes indicated that investors didn’t really learn anything new since it basically reaffirmed the thought that rates would rise before the end of the year.

If you watch the U.S. Treasury Note and Bond markets, you’ll see that yields have been rising steady since July 6, just about the same time that the major stock indices went into their current three-month rangebound trade.

What the minutes did tell us was that the three dissenters at the September meeting were in favor of hiking interest rates because they were worried that waiting too long could send the country into recession.

Those that agreed with the decision to leave rates unchanged made their decisions because they felt it was “appropriate to await further evidence of continued progress toward the Committee’s statutory objectives.”

FORECAST

With the minutes out of the way, investors are likely to focus on earnings the rest of the week. However, the upcoming November election will also be on their minds. Additionally, the movement in crude oil will also be closely watched because there are indications the deal to curb output may be falling apart.

On Tuesday, Alcoa began earnings season by posting weaker-than-expected results. This is important because a weak start to the season may add more skittishness to the market.

Although Clinton is expected to win the Presidential election in November, which means business as usual in the markets because she represents the status quo, traders are concerned that the Democrats will sweep the House of Representatives and Congress. This is likely to mean that there may be reforms proposed for the healthcare industry. This may pressure the stock sector.

Crude oil prices are starting to show signs of topping out which could weigh on energy stocks which could drag down the energy sectors of both the Dow and the S&P 500. Crude is starting to show signs of weakness because of reports showing Saudi Arabia produced a record amount of oil in September while at the same time trying to get other OPEC nations and non-OPEC nations to agree to price cuts.

The trend is down in the equity indices which suggests investors may be looking for value. We are also headed towards the bottom of the range which could attract buyers. Both areas are below current prices so I think the market will do some work on the downside.

There are just too many uncertainties in the news at this time to convince investors to buy aggressively so I can see the current weakness continuing over the near-term.