S&P futures suggest a slightly lower open. That isn't bad after Friday's big gain.
The market's focus is squarely on the Fed's policy meeting on Wednesday and a European Central Bank (ECB) meeting on Thursday. Equity market participants are hoping for central bank action that will decrease economic risk, increase liquidity, and in theory therefore boost stock prices.
Recent data out of Europe have suggested that economic prospects in the region are worsening, but perversely, that may be helping stock prices because of the increased need for central bank stimulus. European stock exchanges were higher late last week, and are up today. The Italian and Spanish 10-year yields have dropped precipitously the past week, and are down to 5.98% and 6.56%, respectively.
There are no US economic releases today, and no major earnings reports.
The earnings trends are poor, as forecasts are now for a slight decline in third quarter profits for the S&P 500 in aggregate. Expectations are likely to drop even further over the next two months. That is what typically happens the last two months of a quarter, and this time the estimate drops might be more severe than usual because economic growth is slowing in the US, Europe, and China.
The fundamentals are worsening. Economic growth is poor, and profit forecasts are dropping. The stock market is up because of expected Fed and ECB action. That isn't the foundation, in our opinion, for a long-term rally.
Founder and Chairman, Briefing.com