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This is why Washington wrangling could become a bigger deal in the week ahead

In the void before earnings season, Washington could bubble up as a bigger focus for markets in the week ahead.

The House is expected to vote on a heath care bill Thursday, and if it passes that would be seen as a small step moving Congress closer to considering tax reform, though any legislation must also battle its way through the Senate.

"Washington has been such an important driver of the rally since the election, so every week is important in terms of what is new on health care and what's new on tax reform," said Peter Boockvar, chief market analyst at The Lindsey Group. President Donald Trump had promised tax reform would be taken up weeks ago, but that time frame has come and gone, and the markets have been watching congressional efforts to move ahead on health care, which is first on the agenda.

The full House vote on the health care bill is scheduled seven years to the day that the Affordable Care Act was made law. "The big story in the market is whether the delays in health care reform are delaying tax reform. That's what everybody's focused on now," said Daniel Clifton, head of policy research at Strategas. Clifton said the plan that drew fire this past week will be modified to appeal to more conservative members, and he expects it to pass the House. It then could take weeks to make its way through the Senate.

"This is just the normal legislative process. The Senate bill is going to be radically different than the House bill," said Clifton. "If they are successful in passing the health care bill, there is $900 billion dollars of tax cuts." After health care, the Congress will deal with the budget and then move on to tax reform, which Clifton said should be considered in the second half of the year.

"If this gets held up … then tax reform gets pushed out to next year, and that's not priced in. If you get that agenda item behind them, then you know you can start moving on tax reform and deregulation and that seems to be the line up," said Art Hogan, chief market strategist at Wunderlich Securities.

The economic calendar is light in the week ahead, though there are durable goods on Friday and housing data on Wednesday and Thursday. There are also more than a half dozen Fed speakers including Fed Chair Janet Yellen who speaks at a Fed conference Thursday. After the Fed's recent offensive to convince markets it was prepared to raise rates this past week and its fairly dovish post-rate-hike comments, the markets are not expecting much from Fed speakers.

"I think you'd be shocked to get any surprises from any Fed speakers. I don't think anybody's going to stick their neck out, and they did a great job of choreographing this meeting," Hogan said.

So the market in the coming week could continue to trudge ahead, with an eye on Congress. "We're sort of in this information vacuum where the quarter is ending and you're a few weeks away from getting corporate earnings. The Fed is out of the way, the inflation data is out of the way," said Boockvar. "It's information no man's land."

Jeff Mortimer, director of investment strategy at BNY Mellon Wealth Management, said he expects the stock market to continue higher for now.

"I think markets march higher over the short to intermediate term," he said.

Earnings will be the next big focus. "We're going to get back to fundamentals. We'll look to Washington to see how they're progressing on health care, tax reform and the infrastructure bill, but I think in the next few weeks, it will turn to what it always does. It will turn from a top down to a bottom up perspective. We remain constructive on the markets. We're a tick over fair value, but our belief is equities will continue to outperform," said Mortimer.

He said a major theme for the market has been how resilient it's been, and he expects that to continue for the next year to 18 months.

"History speaks to the fact that as long as the market sees progress in Washington that I think it continues to find firm footing," Mortimer said. He said the market is also quite comfortable with the Fed's projection of two more rate hikes this year.

"I think the market will continue to look for progress in Washington, but I don't think it has a due date in mind," he said.

"Valuation concerns me a bit but it doesn't take away our bullish view," he said. "Could you get a 5 percent pullback for no reason whatsoever? Of course, you could … if there's a variable that could tip us over its higher inflation. That's the variable I have on my radar."

In the past week, stocks were flat to slightly higher. The S&P 500 was up 0.2 percent at 2,378, and the Dow up was virtually flat at 20,914, while the Nasdaq gained 0.7 percent to 5,900. Treasury yields moved off their highs after Wednesday's Fed meeting, and the 10-year was at 2.50 percent last Friday.

What to Watch

Monday

Earnings: Movado

10 a.m. QFR

1:10 p.m. Chicago Fed President Charles Evans

Tuesday

Earnings: FedEx, Nike, Petrobras, General Mills, Lennar, Lands' End

8:30 a.m. Current account

8:30 a.m. Philadelphia Fed manufacturing

12:00 p.m Kansas City Fed President Esther George

6:00 p.m. Cleveland Fed President Loretta Mester


Wednesday

Earnings: Tencent, Winnebago, Five Below, Acushnet
9::00 a.m. FHFA home prices

10:00 a.m. Existing home sales


Thursday

Earnings: Conagra, Scholastic, KB Home, Accenture, GameStop, Shoe Carnival, Micron

8:30 a.m. Initial claims

8:45 a.m. Fed chair Janet Yellen makes opening remarks at Strong Foundations Conference

10:00 a.m. New home sales

12:30 p.m. Minnepolis Fed President Neel Kashkari at Strong Foundations Conference

7:00 p.m. Dallas Fed President Rob Kaplan


Friday

Earnings: Finish Line

8:30 a.m. Durable goods

8:45 a.m. Chicago Fed's Evans

9:05 a.m. St. Louis Fed President James Bullard

9:45 a.m. Manufacturing PMI

10:00 a.m. New York Fed President William Dudley

Watch: Stockman says markets misreading Washington