The tentative pre-open sentiment today is likely a sign of
things to come this week given the heavy economic calendar, with
GDP, Fed, and jobs reports coming out later this week. On the
earnings front, the reporting season is past the halfway mark.
What we have learned thus far is that while earnings aren't
terrible, they fail to provide sufficient justification for the
market's current level either.
The FOMC meeting this week is not expected to provide any fresh
headway on the QE question, but that is the big issue for this
market. Bernanke & Co have been successful in reassuring the
market that they plan to keep short-term interest rates at
current levels for a very long time even after they start pulling
back from the QE program.
These assurances helped stall the scary looking uptrend in
long-term interest rates that appeared to be threatening the
housing recovery. Housing related stocks have yet to recover from
the shock of the interest rate move since May, though we haven't
seen any evidence yet that the rise in interest rates thus far
has had a material negative impact on the sector beyond
Related to the Fed issue is the Q2 GDP report Wednesday morning
and the July jobs report on Friday. Of these two, the GDP report
could be the more interesting one as in addition to growth
numbers for the second quarter, GDP data going back many years
will get revised. As we saw in 2011, sometimes these GDP
revisions could throw up many surprises.
The economy isn't expected to show much growth for Q2, with
the GDP number expected to show a sub-1% growth pace. But the
expectation is for the growth pace to start getting better from
Q3 onwards. We have yet to see any evidence of this expected
improvement, but that's the view underpinning consensus
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