Earnings and the prospect of merger/acquisitions were the principle driver of volume and price action yesterday, as should be the case at this point in the calendar.
Roughly 65% of those companies that have reported thus far this earnings season have beaten, largely lowered expectations.
That trend has provided some support to the market in conjunction with Thursday’s FOMC Announcement and the ensuing rally in crude.
There remain plenty of headwinds for this rally – both domestically economic-centric and globally.
For example, today, the Bank of Japan is scheduled to release its statement focused on stimulus. Economists are split as to whether the BOJ will announce further stimulus. Additionally, fears abound as to whether China’s recent efforts to shore up its markets and cobble together a comprehensive and effective long range stimulus package for its economy will have the desired therapeutic effects policy makers are aiming for. The ECB has repeatedly made it clear that it is intent on purchasing more bonds in an effort to ignite some consumer and industrial demand. Japan is still in an easing posture, as is China.
The point of contention in all these narratives, broadly speaking, is that the U.S. Federal Reserve is the only Central Bank poised to move on rates – globally. Can it?
Greece remains filed in the “Unfinished Business” folder. The Middle East is a tinder box. Russian jets have been engaging US military operations from the skies of Syria to the coast of Japan and Korea in recent weeks. There are many variables at play – any one of which could adversely impact our current trade higher in equities. All that said, yesterday’s pause was healthy.