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Bank earnings are supporting record highs in stocks: trader

By Peter Kenny, chief market strategist for Global Markets Advisory Group and owner of KennysCommentary.com

Themes:

  • Austrian vote nudges Europe’s balance to right as populists gain – Bloomberg
  • Philadelphia Semiconductor Index notched its 7th consecutive record close on Friday
  • Initial weekly jobless claims fall to a 42-year low least week; 4-wk. M.A. stands at 257.5k
  • CPI remains stubbornly well contained at Y/Y 2.2%
  • IMF Annual Meeting of Governors met in Washington, D.C. over the weekend
  • The “Trump Bump” post-election rally trails several other presidential rallies
  • US equity markets remain at or fractionally off record highs
  • US Consumer Confidence records highest reading since 2004
  • US Retail Sales register best monthly results since 2015 (fueled by hurricanes)

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WTI Crude Oil (Nymex) (CL=F) $51.93/bbl
Gold (Comex) (GC=F) $1,301.60/t. oz.
10-year Treasury Note yield (CBOE) (^TNX) 2.30%
Volatility S&P 500 (^VIX) 9.92
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Investors face heavy earnings and light economic calendar

This week’s economic calendar, though relatively quiet, will provide for some interesting data following last week’s strong economic releases. Import and export prices, due out Tuesday morning, are expected to come in at 0.5% and 0.4% on a M/M basis. Also on Tuesday, industrial production for September is scheduled for release. The M/M change in the reading is expected to be 0.1% or flat. Given last month’s reading was an unexpectedly weak -0.9%, a flat reading would be welcome. Both Manufacturing and Capacity Utilization are expected to tick incrementally higher on a M/M basis to 0.3% and 76.2% respectively. The Housing Market Index is expected to remain unchanged at 64.

On Wednesday, we receive housing starts data for September as well as the more forward-looking permits data. The very closely watched Atlanta Fed business inflation expectations reading is due on Wednesday. Given how central the inflation narrative is to the Fed’s timeline on rates and how close inflation is to target, this will be an important to investors. The EIA Petroleum Status Report on Wednesday is expected to reflect a draw of crude and distillate inventories, while gasoline inventories are expected to reflect a modest build. In the event we do receive a mixed report as expected, crude is likely to remain trading with a “5 handle” this week. Crude oil’s firmness in pricing remains a theme that is expected to have a constructive and material impact on inflation — eventually.

On Thursday, weekly jobless claims, the Philadelphia Fed Business Outlook Survey and leading indicators will dominate. After last week’s jobless data, which registered a 42-year low, many are expecting this week’s reading to modulate. In the process, this week’s report should keep the 4-week average closely tethered to last week’s figure. The General Business Conditions Index, which is released within the Philadelphia Fed Outlook, is expected to come in at 20.2 — down from September’s 23.8. Leading indicators for September are also expected to tick fractionally lower to 0.1% from August’s 0.4%.

With a relatively quiet economic calendar on tap this week, investors will turn their collective attention to corporate earnings. As we discussed last week, financials were in focus, as is traditionally the case at the outset of earnings season. The financials that did report last week provided a constructive underpinning for the broader earnings season as is evidenced by our record closing highs on two of the three major equity indices on Friday. That said however, the Financial Select Sector SPDR ETF (XLF) lost fractional ground on the week, falling 0.83%.

The earnings calendar this week is busy and will be dominated by results from Goldman Sachs (GS), Morgan Stanley (MS), American Express (AXP), General Electric (GE), Proctor & Gamble (PG), Netflix (NFLX) and Verizon (VZ).

Economic calendar (all times Eastern):

Monday

Neel Kashkari,  9:00 PM

Tuesday

8:30 AM Import and Export Prices

8:55 AM Redbook

9:15 AM Industrial Production

10:00 AM Housing Market Index

Wednesday

7:00 AM MBA Mortgage Applications

8:30 AM Housing Starts

10:00 AM Atlanta Fed Business Inflation Expectations

10:30 AM EIA Petroleum Status Report

2:00 PM Beige Book

Vice-Chairman Stanley Fischer

William Dudley and Robert Kaplan, 8:00 AM

Thursday

8:30 AM Weekly Jobless Claims

8:30 AM Philadelphia Fed Business Outlook Survey

9:45 AM Bloomberg Consumer Comfort Index

10:00 AM Leading Indicators

Friday

10:00 AM Existing Home Sales

1:00 PM Baker-Hughes Rig Count

Chair Janet Yellen

Loretta Mester,  2:00 PM