What’s More Important Than the Election?

Stocks opened higher on Monday, and within 30 minutes the Dow was up 1%. But that was the high of the day, with sellers dominating the market until just before the close. The selling was no doubt due to uncertainty regarding the midterm elections, a higher U.S. dollar, and the Fed policy on QE2. But income and spending data were disappointing, with September personal income slipping 0.1% and spending up only 0.2%. The ISM, however, said that the U.S. economy continued to grow in October. Its purchasing managers’ index rose to 56.9 from 54.4 in September. The FOMC is expected to announce a plan on Wednesday to stimulate the economy. But last week, murmurings from Fed sources seemed to indicate that the amount of stimulus will be much less than first anticipated. And the ISM report offers little encouragement for the Fed to move to a more aggressive policy. Technology stocks rose yesterday following a Semiconductor Industry Association announcement that global chip sales rose 2.9% in September. On the news, Intel Corporation (NASDAQ: INTC ) rose 2.6%, and Hewlett-Packard Company (NYSE: HPQ ) gained 1.1%. Energy stocks did well following an earnings surprise from Baker Hughes Incorporated (NYSE: BHI ). The company reported Q3 earnings of 54 cents versus an estimate of 47 cents, and the stock jumped 4.2%. The yield on the 10-year note rose to 2.63%, up 3 basis points. The greenback rose on the higher manufacturing data.  In late-afternoon trading, the euro was at $1.3885, down from $1.3919 on Friday. At the close, the Dow Jones Industrial Average rose 6 points to 11,125, the S&P 500 gained a point at 1,184, and the Nasdaq fell 3 points to 2,505. The NYSE traded 959 million shares with advancers just slightly ahead of decliners. The Nasdaq crossed 526 million shares with decliners ahead by 1.7-to-1. Crude oil for December delivery rose $1.52 to $82.95 a barrel, and the Energy Select Sector SPDR (NYSE: XLE ) gained 7 cents and closed at $59.31. December gold fell $7 to $1,350.60 an ounce following the upbeat U.S. economic data and a stronger dollar. The PHLX Gold/Silver Sector Index (NASDAQ: XAU ) closed at 204.86, up 0.56 points. What the Markets Are Saying Both the Dow Industrials and Nasdaq came within a fraction of making a higher intraday high yesterday, before succumbing to sellers. And the Nasdaq, with a slightly lower close, registered a reversal down, though such small differences may have little consequence. With the election virtually certain, it is fair to say that the market has a Republican victory built into it. But what of the Fed’s pending decision to inject more capital into the markets? And, even more important, how much more capital? Last week, the Fed’s hints of a lower-than-expected purchase of T-bonds left the markets unsettled. And the tomblike silence this week is not helping either. However, with the markets now at close to April’s highs, we have to expect a slight penetration of the highs and a rush of some buyers to jump onboard. But then a sharp pullback and consolidation could bring the markets in line and erase the overbought internal and sentiment numbers that have kept us on edge for the last two weeks.  In addition to the elections and the Fed’s maneuverings, the monthly jobs numbers will be released before the opening on Friday. There is certainly enough news to create either a breakout or a breakdown. The ball is now in the bull’s court, and as the saying goes, “It’s their game to win or lose.”  For one mining stock that looks ready to climb higher, see the Trade of the Day . Today’s Trading Landscape Earnings to be reported before the opening include: American Superconductor, AmerisourceBergen, Arch Chemicals, Archer-Daniels, Art Technology, Assisted Living Concepts, Bill Barrett, BioScrip, BP, Bridgepoint Education, Cabela’s, Cameron, CareFusion, Cedar Fair, Checkpoint Systems, Clorox, CommVault Systems, Corinthian Colleges, Dice Holdings, DigitalGlobe, DineEquity, Dollar Thrifty, EMCOR Group, Emergency Medical Services, Emerson, EW Scripps, Expeditors International, Fresh Del Monte, Fushi Copperweld, G&K Services, Gaylord Entertainment, Genesee & Wyoming, Glatfelter Co, Harman, HCP, Headwaters, Heidrick & Struggles, Impax Labs, Kaydon, Kellogg, Magellan Midstream, Marathon Oil, Martin Marietta, MasterCard, MCG Capital, Medco Health Solutions, MEDNAX, Melco Crown Entertainment, Monotype Imaging, Newmont Mining, NICOR, NPS Pharmaceuticals, Nu Skin, NYSE Euronext, Och-Ziff Capital, Overseas Shipholding, Perrigo, Pfizer, Radian Group, Ritchie Bros, Rowan Companies, RTI International Metals, Spirit AeroSystems, St. Joe Company, State Auto Financial, Steven Madden, Talisman Energy, Tenet Healthcare, Teva Pharmaceutical, Trex, Universal American Corp., Venoco, Vishay, Vornado Realty Trust, W&T Offshore and West Pharmaceutical. Earnings to be reported after the close include: Actuate, American Capital, American Reprographics, Argonaut Group, AsiaInfo, Asset Acceptance Capital, BGC Partners, Big 5 Sports, Bio-Rad Labs, Black Box, Blackbaud, BRE Properties, BTU International, CAI International, Cardtronics, Career Education, CBL & Assoc, Chiquita Brands, Comfort Systems USA, ComScore, Ctrip.com, DCT Industrial Trust, Denny’s, Discovery, Douglas Emmett, Drugstore.com, Electronic Arts, EOG Resources, Exactech, Excel Maritime Carriers, Exco Resources, FEI, First Financial, Glu Mobile, Hartford Financial, Hertz Global, Hypercom, Innophos Holdings, ISTA Pharmaceuticals, Jack Henry, Lance, Leap Wireless, Lincoln National, MAKO Surgical, Masimo, Montpelier Re, Mueller Water, Myriad Genetics, Nanometrics, National Interstate, North American Energy, ONEOK, ONEOK Partners, OpenTable, Ormat Technologies, Orthovita, PC Connection, Peet’s Coffee, Pericom Semiconductor, Pitney Bowes, Plantronics, Primerica, RehabCare, Rentrak, Roadrunner Transportation, SM Energy, Sonus Networks, SRA International, STEC Inc., SuccessFactors, Synchronoss Technologies, Syniverse Holdings, Trimble Navigation, Triumph Group, Union Drilling, Unum Group, USEC, Watts Industries, Web.com, World Fuel Services, Wynn Resorts, XL Capital and ZipRealty. Economic reports due: motor vehicle sales (the consensus expects 8.8 million), ICSC-Goldman Sachs store sales and Redbook. If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net .
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