Markets Essentially Hold Pat With A Little Nagging Voice Chattering About The Fed And Interest Rates

The Federal Open Market Committee begins its latest meeting tomorrow. Although some jitters are rippling mildly through markets, there is not much to worry about regarding an immediate rise in U.S. interest rates.

Some analysts are looking for more hawkish sentiment come Wednesday when the Fed releases its statement and Chairwoman Janet Yellen conducts a brief news conference. Data hasn’t been all that strong, we believe, to warrant even a slightly more hawkish read out by the FOMC.

Just today, the Commerce Department announced that new home sales fell in September to 468,000 units, far fewer than were expected. That was the lowest level since November of 2014. New home sales figures for August were revised downward, to boot.

We are also in the midst of a decidedly mixed earnings season. As we have cited often in the last two weeks, it’s not earnings (profits) that are the big concern on the street but rather revenues, which have been shrinking.

The ominous side to that divergence is simple to describe. You can cut your way to profitability, but only for so long. The preferred way to show more earnings is by growing a business. We think this is a canary in the coalmine and should be regarded with the utmost seriousness.

All three New York indexes are clinging precariously to last week’s gains, trading a few tenths of a percent lower or ever so slightly higher (in the case of the NASDAQ). The S&P 500, the most balanced index, fairly reflecting much of the American economy, is looking for new direction based on news or innovation. It did not find any such thing today.

Softer crude oil prices yet again, plus worries about Apple earnings are creating quite a bit of drag on the momentum that formed last week. West Texas Intermediate slipped below $44.000 per barrel and Apple is down almost $4.00 per share. That’s the lowest price in two and a half months.

The maintenance cycle in U.S. gasoline and distillates refineries – the switch from summer blend to winter blend – is at an end. While certainly parts of the world have experienced some early cold, in general, “heating degree days” are at a low for the season.

As we said Friday, “glut” is the watchword for all petroleum-based products.

Gold had a chance today to make some hay with the help of a declining U.S. dollar but regular trading knocked total gains to near zero.

One would think that given the poor prospects for a Fed rate rise, the wise investor would be position his or her portfolio with an eye toward gold moving higher.

Of course, there is always that nagging voice inside that is mesmerized by the expression “October surprise.” Although we’re firmly convinced that Ms. Yellen is not a surprise party kind of woman.

Wishing you as always, good trading,