Trader Talk

Markets: Next Week It's All About The Fed


Ending at highs for the week, with both the Dow and the S&P up more than 2% for the week; Nasdaq up nearly 3%. Techs up on Microsoft ; energy stocks up on oil, Kerkorian's partial bid for Tesoro , and a belief that global growth will remain strong and not diminish demand for oil; and thrifts up on Countrywide .

Kudos to Countrywide. Despite open derision from traders for their attempt to call a bottom in their stock, the conference call went well,with the company providing an extraordinary degree of granularity (read: detail); stock began rising as conference call wound down.

Next week, it's about the Fed, and the question for stock traders is how much will they cut rates, not will they cut--most feel they will cut a quarter point, a substantial minority argue for a half point cut, saying the last time they cut a half point it didn't do much for the fixed income markets, they need to keep being aggressive.

We won't be lacking for data--Q3 GDP, the October jobs report, and more earnings--60% have already reported, but we have energy and retailers coming.

Fourth quarter earnings coming down. One reason for the skepticism despite strong global growth is that fourth quarter earnings (it's Q4 that matters folks, not Q3!) continue to come down, particularly in financials. Earnings growth for the S&P 500 for Q4 is now 9.5% (it was 11.5% Oct. 1). For financials, numbers are dropping fast: 2.0% growth, it was 7.0% Oct 1.

Questions?  Comments?