Despite the End of Earnings Season, Corporate Activity Likely to Drive Price Action

Slow and steady appears to be the message on Wall Street early Monday with stocks grinding higher on low volume. Earnings season is rapidly coming to a close, leaving investors with little to follow except geopolitical events, economic data and other corporate news.

The situation in Turkey appears to have calmed enough to make today a risk-on session. Last week’s steep sell-off in the Turkish Lira wasn’t really about its economy, but U.S. tariffs. The Turkish economy has been in a steady decline for quite some time so this had been priced into the market. But investors weren’t prepared for the additional tariffs from the U.S.

So although conditions have calmed, culminating with a markdown by the credit rating agencies this week-end, the situation is still a powder keg because the U.S. could impose additional sanctions at any time. However, with Turkey going on holiday from August 21 to August 24, we may see limited action in the currency until later in the week.

Additionally, it doesn’t look like European banks faced a contagion problem after all. That may have just been a rumor to drive the Euro lower. Finally, the situation in Turkey may have been overplayed last week since its economy is about the size of Florida’s.

Financial turmoil in the markets could return at any time over the near-term, but not because of problems in Turkey, but in response to growing concerns over economic crises in Venezuela and India.

The “other” economic event this week is the renewed trade talks between the United States and China. Despite the friendly headlines, insiders are saying that this meeting, which is supposed to take place this week, is a low-level meeting so don’t expect any major news.

Domestically, the Fed minutes is on the watch list for many investors this week. However, today’s stock market activity suggests the minutes from the last Federal Open Market Committee meeting about two weeks ago is not expected to show any major surprises. This is typical of the July meeting minutes. The Fed usually makes its moves at its quarterly meetings. There may have been some discussion of the impact of tariffs on the economy, but nothing that could have affected Fed policy. Additionally, the meeting took place before Turkey’s currency crisis so we’re not likely to see any policymaker comments on stock market volatility or the weakness in the emerging markets.

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Earnings may be over, but that hasn’t stopped corporations from making news and driving the stock market higher. Monday morning, Pepsi agreed to buy SodaStream for $3.2 billion, or $144 per share. According to CNBC, the agreed price per share represents a 10.9 percent premium from SodaStream’s closing price of $129.85 on Friday. The deal is expected to close by January.

In other corporate news, Tyson Foods confirmed it was buying Keystone Foods, a chicken-processing company, for $2.16 billion in cash.

Stocks are expected to continue to grind higher this week because the news events are expected to be positive, or have no major impact. Furthermore, the market is in a position to become the longest bull market in history.