A Sideways Summer Stall?
The markets have made a decided move to the upside since late June, but during the past couple of days we’ve seen a bit of a summer stall. Trading volumes have been relatively light, and the markets now are keying on the bevy of earnings reports that have come in.
So far, we’ve seen some high-profile earnings winners, notably Apple (AAPL), Boeing (BA), General Electric (GE) and Ford (F). We’ve also seen some high-profile earnings disappointments, such as Caterpillar (CAT), Coca-Cola (KO), IBM (IBM) and McDonald’s (MCD).
Now that we are in the heart of earnings season, I expect the markets to tread a bit of water here while we wait for additional data. Of course, the big tailwind for stocks here, as it has been for several years, is the Federal Reserve. The quantitative easing (QE) “taper” talk now seems to be on the back burner, and traders are counting on the fact that the Fed will be there with the easy money whenever the data gets soft. And even if the Fed moves to begin pulling back the reins on its bond buying scheme, the market is convinced that this won’t be significant enough to derail the monetary gravy train.
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