Market Perspective for November 9, 2015

Investors will continue to digest the news of improving employment numbers reported on Friday as well as comments by Fed Chair Janet Yellen and other Federal Reserve officials. Traders are now pricing in a 70 percent chance that the FOMC will raise rates at their meeting scheduled for December 15 and 16. It would be the first rate hike in over a decade.

A significant number of firms in the retail sector will be reporting their earnings over the coming days. Macy’s (M) will report on Wednesday, Kohl’s (KSS) on Thursday and J.C. Penny (JCP) on Friday. All three well-known retailers are also expected to deliver slightly better results.

Dow component and technology giant Cisco Systems (CSCO) will report on Thursday and analysts anticipate Cisco delivering earnings of $0.51 per share versus $0.48 for the same quarter in 2014.

Over the weekend, Chinese trade figures came in even worse than was expected. Exports for October dropped 6.9 percent versus a year ago and have now dropped for the fourth consecutive month. Imports slipped 18.8 percent. The consensus was for exports and imports to drop 3 and 16 percent respectively. Values at the Canton Trade Fair, which ended last week, saw contract values fall 7.4 percent compared to 2014, which is strongly correlated with GDP growth. These figures reinforce the opinion that the world’s second largest economy will do more to stimulate domestic growth. Commodities, especially crude oil, should remain under pressure, but Chinese stocks rallied on the expectation of more stimulus.

The overall tone in the U.S. is bullish. The NASDAQ 100 hit a new record last week and the S&P 500 Index is within 2 percent of its May 2015 highs. A key index to watch this week will be the Russell 2000, as it will face some overhead resistance.

The bond markets will be closed on Wednesday in observance of Veterans Day, which may affect mid-week trading. Economic reports over the coming days include retail sales for October and consumer sentiment for November. A key number for third quarter GDP is wholesale inventories, which will be released tomorrow. This figure often plays a large role in GDP revisions and will impact the second estimate of third quarter GDP growth, which will be made public at the end of November. Any positive surprise will harden rate hike expectations.

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