The markets are open today, but there is not much on the
economic or earnings calendars because of Veterans Day holiday.
With the calendar for the rest of this week on the light side as
well, stocks will likely struggle for direction with Fed-centric
issues dominating the discourse.
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The key issue for the market at this stage is handicapping when
the Fed will start its QE Taper. The Fed has only one meeting
left this year (in December) after which Bernanke is scheduled to
retire. Given this timeline and the scheduled leadership
transition, the consensus view has been that the central bank
will leave the Taper announcement to next year, likely to April
2014. But the recent run of positive economic data, ranging from
the ISM surveys to Q3 GDP and October non-farm payrolls, has put
the December Taper back on the market's agenda. The market will
be closely watching the coming Janet Yellen confirmation hearings
to get a sense of the new Fed Chair's thinking on the subject.
On the earnings front, we have reached the final phase of the Q3
reporting season with results from 449 S&P 500 members
already out. It has been a good enough earnings season, with
total earnings reaching a new all-time record. There is not much
growth and most companies have guided lower, but the overall
earnings growth in Q3 has been better relative to what was
achieved in the first two quarter of the year. The Retail sector
is heavily represented in the still-to-come reports, with 22 of
the remaining 51 S&P 500 from the Retail sector. This week's
) and others will give us a good sense of what to expect from
consumer spending in the holiday-shopping season.
Stocks have had an impressive run thus far in 2013 and odds are
high that the trend will continue into these final weeks of the
year as well. But nothing goes up forever. The expected change in
Fed policy, whether in December or early next year, could be the
catalyst that puts an end to the market's strong recent run.