Market Recon Monday

Good Morning,

This Week.

The week in front of us shapes up as fairly active. From the S&P 500, we’ll see quarterly numbers from 87 corporations, and then there’s the macro. Last week, the looming September Retail Sales data, which turned out pretty good, dominated an otherwise quite week from a macro-economic perspective. This week, starting with today’s Industrial Production print, there will be at least one high-profile, possibly impactful item released every day through Thursday. From a policy point of view, there are scheduled Fed speakers every day this week, with the exception on Tuesday. The ECB will also make a decision this week, on Thursday, without the overhang of a BOE policy decision being made directly before or after. How Mario Draghi handles the press conference will be of heightened interest, even if no policy changes are announced. Since the last ECB policy meeting, there has been talk of both extending the central bank’s QE program past March, and also of tapering the program’s purchases. The BOE will not step to the plate again until 3 November, the day after the FOMC’s next decision.

Trader Focus.

Today’s focus, at least in the early going will be placed directly on weakening global sovereign debt. Particularly on European debt, but US Treasuries are experiencing some early morning softness as well. On top of the already mentioned policy hurdle facing the ECB, the BOJ’s Gov. Hiruhiko Kuroda spoke far less dovishly over the weekend than he had in the past. Add that to the belief that the FOMC will act at their last meeting of the year, and globally, there are many markets pricing in tighter monetary conditions. The direct pressures that this places on debt products and currency exchange rates in turn will move commodity prices, and ultimately in “tail wag the dog” fashion, the equity markets. If it were only it were just that simple. OPEC does not formally meet until the end of November, and then there is this earnings season that has just begun. With the US central bank being the only major central bank talking about not only being less accommodative, but tightening policy, exchange rates (already the 800 pound gorilla in the room) will only increase in market impact and corporate performance.

Macro

08:30 – Empire State Manufacturing Index (October): Expecting 1.2, September -2.0. This will be our first look at the state of manufacturing for the month of October. We expect to see that the New York region actually experienced some overall expansion this month, after a two month losing streak. Two of the five regional Fed districts did hit the tape in expansion for September as did the ISM Survey, showing marked improvement from the August data. Being released alone at 08:30, this item could impact the futures markets upon release.

09:15 – Industrial Production (September): Expecting 0.2%, August -0.4% m/m.

09:15 – Capacity Utilization (September): Expecting 75.6%, August 75.5%. These numbers rolled off of the table for August after a couple of decent months in a row. Market expectations are that there was a positive rebound in September, both for Production, and to a lesser degree, Utilization. This is the highest profile macro event of the day, at east until Noon, and the equity markets will likely take their pre-opening cue here.

12:00 – Fed Speaker: Federal Reserve Vice Chair Stanley Fischer will speak in New York City. Fischer , a permanent voting member of the FOMC is considered hawkish at this time. He is on record recently calling the decision to stand pat on rates in September a “close call”.

Monday’s Earnings Highlights

Before the Open: BAC (.34), SCHW (.33), HAS (1.74)

After the Close: IBM (3.23), NFLX (.05), UAL (3.05)