The U.S. stock market seems positioned for a higher start this morning, as a new week on Wall Street unfolds. Overseas, the major markets have been trading in a mixed fashion, but on our shores, the broader equity market futures are now nicely ahead.
In economic news, there will be numerous reports for traders to digest this week. This morning, the Institute for Supply Management (ISM) Manufacturing Index for the month of September will be released. This issuance provides a wide measure of production across numerous industries, and can be quite informative. In addition, the latest monthly construction spending figures will be published today, and this report should also receive some attention. Meanwhile, the main event will take place at the end of the week. On Friday before the market opens, the government will release the September employment numbers. Notably, the labor market has remained quite strong lately, even as other parts of the economy have softened. While this has provided support for the economy, upwards pressure on wages may be contributing to the nation’s inflation problems. Clearly, this development has not gone unnoticed by the central bank.
In corporate arena, a small batch of corporations will deliver profit reports this week. On Wednesday, we will hear from Helen of Troy (HELE). On Thursday, Constellation Brands (STZ), and Conagra (CAG) weigh in with their numbers. It should be mentioned that the third quarter has finally concluded, and the earnings season will commence shortly. Given the challenging environment, investors may have concerns that corporations could post weak results, and provide disappointing guidance for the remainder of the year. Although equities currently seem to be trading at more reasonable valuations, traders will likely be disappointed if profit forecasts are scaled back.
From a technical perspective, the S&P 500 Index lost considerable ground during the month of September. The broader market average has fallen below the level hit in mid-June, and many traders probably view this development as a sign of weakness. Sentiment has become quite bearish, and seems to be reaching extreme levels. However, it is difficult to predict where stocks might find meaningful support, especially given the complex set of problems at home and abroad. We direct subscribers to look carefully at companies that have strong balance sheets, and cash flows that can easily support dividend payouts. Subscribers to The Value Line Investment Survey® will find a list of these companies on page 1630 of the current Selection & Opinion section of the Survey. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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