Market Perspective for October 2, 2017

Financials, industrials, materials and technology all hit new 52-week highs during Monday trading, and all sectors except energy, which dipped with oil prices, opened higher.

Manufacturing strengthened in September. The Markit and ISM manufacturing PMIs both increased to 53.1 and 60.8, respectively. The ISM reading was the strongest since 2004. China’s manufacturing PMI hit a 5-year high, and Germany saw its highest reading since 2011.

U.S. construction spending increased 0.5 percent in August, beating expectations. Analysts predict motor vehicle sales reached an annualized pace of 17.1 million in September as drivers started replacing cars damaged by hurricanes. Jobless claims are expected to reflect a slow decline from post-hurricane increases to 265,000 initial claims last week. Friday’s unemployment report is also expected to show a slower pace of job growth in September. The consensus forecast calls for 70,000 new jobs. Economists believe the unemployment rate held steady at 4.4 percent.

Industrial metals rebounded on Monday with China’s markets closed for vacation. Iron ore has suffered its worst month in over a year in September due to Chinese weakness. While metals rebounded, crude oil fell more than $1 a barrel. Gasoline prices broke lower on Monday as well. U.S. Gasoline (UGA) fell to a new post-hurricane low.

Homebuilder Lennar (LEN) will report earnings on Tuesday. Analysts expect $1.01 per share. iShares U.S. Home Construction (ITB) hit a 52-week high on Monday. Lennar is the second-largest holding in the fund, accounting for 9.9 percent of assets. Payroll processor Paychex (PAYX) will also report on Tuesday and is also expected to report flat earnings growth.

Tech investors will look for a rebound in Apple (AAPL) this week. Intel (INTC) jumped more than 2 percent in Monday trading and hit a new 52-week high. iShares Semiconductors (SOXX) followed it into record territory. Google (GOOGL) is still consolidating below $1000 per share.

The U.S. Dollar Index rallied to a six-week high. It could break out of a two-month basing pattern this week. Short-term technical indicators show the dollar at its most bullish since early March.

Catalonia’s independence referendum weighed on iShares MSCI Spain (EWP), sending shares down more than 2 percent. The euro has also declined.

Monsanto (MON) and Pepsi (PEP) will report on Wednesday. Analyst expect a loss at Monsanto, and a small earnings increase at Pepsi. Retail Costco (COST) will report on Thursday. Shares fell sharply in the wake of Amazon’s (AMZN) Whole Foods buyout. Analysts are looking for $2.01 per share versus $1.77 a year ago.

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