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S&P 500; US Indexes Fundamental Weekly Forecast – Earnings Will Drive Price Action, Not Government Shutdown

James Hyerczyk

The major U.S. equity indexes finished higher for a third consecutive week, even with increased volatility due to concerns over a possible government shutdown. The start of earnings season also contributed to volatile moves to the upside.

For the week, the benchmark S&P 500 Index settled at 2810.30, up 0.09%. The blue chip Dow Jones Industrial Average closed at 26071.72, up 1.00% and the tech-based NASDAQ Composite finished at 7333.22, up 1.0%.

Weekly March E-mini S&P 500 Index

In the futures market, the March E-mini S&P 500 Index settled at 2811.00, up 22.25 or +0.80%. The March E-mini Dow Jones Industrial Average closed at 26057, up 256 or +0.99% and the March E-mini NASDAQ-100 Index finished at 6845.75, up 70.50 or +1.04%.

Weekly March E-mini Dow Jones Industrial Average

Although there was one volatile move to the downside last week, investors kept an eye on the government shutdown debate, but didn’t really seem too fazed by the negotiations. The week even ended with the S&P 500 Index and the NASDAQ Composite posting record highs.

Investors appeared to be looking beyond the problems in Washington, remaining focused on the impact of tax reform and fourth-quarter corporate earnings.

Last week’s earnings results surpassed expectations. Of the companies that have reported quarterly results as of Friday morning, 79 percent have exceeded earnings expectations while 89 percent have surpassed sales estimates, according to The Earnings Scout.

Weekly March E-mini NASDAQ-100 Index

Forecast

The U.S. government shutdown over the week-end and based on the latest news, is likely to remain shut down for at least a week. Negotiations between Republican and Democratic government officials will continue throughout the week. The major issues are not likely to be resolved, but they may decide on an extension in order to work out their differences.

The shutdown itself is not likely to cause any problems for investors. However, if the shutdown lasts more than a week then it may start to reduce GDP.

Uncertainty will drive the price action in the market. The more uncertain investors become, the more likely they are to trim their positions.

I don’t expect any major panic selling because this is not an open-ended event. The government will eventually re-open, it’s just a matter of time. This is probably why investors aren’t two concerned about the event.

Earnings season will heat up this week with 79 companies from the S&P 500 Index reporting fourth-quarter earnings.

In the U.S., the major reports are Advance GDP and Durable Goods on Friday. Next week, the Federal Reserve meets to discuss monetary policy.

This article was originally posted on FX Empire

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