S&P 500; US Indexes Fundamental Weekly Forecast – Too Many Uncertainties for the Bulls to Handle

The major U.S. equity indexes closed lower across the board last week with political headlines and worries about Hurricanes Harvey and Irma weighing on investor sentiment.

In the cash market, the benchmark S&P 500 Index finished the week at 2461.43, down 0.6%, the blue chip Dow Jones Industrial Average ended the week at 21,798.00, down 0.9% and the tech-based NASDAQ Composite closed at 6,360.00, down 1.2%.

In Washington, President Trump surprised investors when he struck a deal with the Democrats to raise the debt ceiling and government funding legislation until December.

First Hurricane Harvey devastated Houston, Texas with massive flooding. Now, Hurricane Irma is widely expected to put a financial hurt on Florida when it makes landfall late Saturday night, early Sunday.

Florida is a tourism state so storm surges and wind damage to hotels, beaches and other attractions will hurt the local economy. And like Houston, I’m certain Florida is going to need its share of aid from the Federal government.

Last week, U.S. Weekly Unemployment Claims rose sharply, mostly due to the impact of Harvey. Investors should expect this number to grow this week with additional claims coming from Texas and new claims coming from Florida.

Let’s not forget the Korea Peninsula either. The rogue nation triggered a gap-lower opening in the markets last Monday/Tuesday as investors reacted to another nuclear weapons test in North Korean. The move was strong enough to keep a lid on any rallies last week.

Forecast

This week, investors will get the opportunity to react to several major U.S. economic reports. They include data on Producer Prices, Consumer Prices, Weekly Unemployment Claims and Retail Sales. However the major focus for the week will be on the economic impact of Hurricane Irma.

Irma is expected to rip through the entire state of Florida then move on to Georgia, the Carolinas and Tennessee. Not only will their local economies get hurt, but nationally, the insurance industry is expected to take major losses. This will be a drag on financial industry stocks.

The loss of jobs will be the number one issue. We saw this last week when the Weekly Jobless Claims report came in higher than expected. This number is expected to continue to increase over the near-term.

Also, I think the Fed’s economic reports are going to have to be adjusted. I’m not sure they can get an accurate assessment of the economy until they get a final damage figure and this could take weeks especially if developing Hurricane Jose becomes an issue.

I also think the hurricanes have eliminated any chance of a Fed rate hike this year. Inflation, may actually move lower while the economy adjusts to the two major events.

I can’t find a compelling reason for a rally especially with North Korea being a wild card. Who knows? They may even continue to test nuclear weapons over the week-end. I’m looking for sideways to lower this week.