My thoughts are with all who have been impacted by Hurricane Sandy, which left its mark on the East Coast this past week, causing an estimated $30 to $50 billion in economic loss and damages and claiming nearly 100 lives. Over the three days of trading this week, markets were volatile but unchanged, gaining just a couple of basis points.
Next week’s market-moving events:
Monday ISM non-manufacturing report follows stronger-than-expected manufacturing data and construction spending figures from Thursday. I expect a slight increase month-over-month, confirming modest economic improvements.
Tuesday is Election Day, and it’s too close to call. Moreover, I do not believe that markets will gain meaningful clarity regarding changes in policy from the election. There are several critical economic reports and policy decisions being made this week in China and Europe, however I believe markets will remain focused on the US elections.
Wednesday trading will be driven by the election results and earnings reports. Among widely owned stocks set to report are Kraft Foods (NASDAQ:KRFT), Macy’s (NYSE:M), Devon Energy (NYSE:DVN), Sunoco Logistics (NYSE:SXL), and Molson Coors (NYSE:TAP). So far, about 70% of the companies within the S&P 500 (INDEXSP:.INX) have reported, and of these, only 39% have beaten revenue expectations while 63% have beaten earnings estimates. Revenues have grown 3.6% y/y on average, whole EPS has grown 15.5% y/y on average.
Thursday's jobless claims numbers will be the only meaningful economic figures reported that day.
Friday's trading is likely to be driven by consumer sentiment figures as well as the end of the third quarter earnings season.
Focus on market data, not market reaction. There are a lot of distractions for investors, not the least of which Tuesdays’ elections. Sell on rallies and continue to buy January or February Puts to lower portfolio volatility. Focus on companies that are growing revenues, over EPS data.
Follow Oliver Pursche on Twitter: @opursche.
No positions in stocks mentioned.