Market Alert - Pre-Market

Futures vs FV: SP +4.39; DJ +114.56; NASDAQ +6.56

The hunch may have been the market was close to a flat line rollover, but earnings from IBM (a beat and saying it will actually make money in Q4) coupled with good results already from JNJ and UNH (both increased guidance) are sparking DJ30 higher. The other indices show positive futures, but nowhere near the level of DJ30. That still suggests the same issues for small and midcaps discussed in the Tuesday report, but for the morning stocks are going to open green. Indeed, futures are, after a lateral move for 2 hours, moving to higher pre-market highs.

It is not just IBM. China's Xi opened the China Congress with a rousing speech where he was looking to take China into 2050. He boasted how socialism has worked even as he opens the 'Communist Congress.' That's okay; most people in the world are so poorly educated, including the ones here in the US, to know the difference between the two.


Taxes: Treasury Secretary Mnuchin says better reform better pass or the market will crash. Or something like that. There are those who say that the market rise has not built in any tax reform. Hmmm. Look at how the small and midcaps exploded higher and led the market through this run at the same time the tax plan was announced with its tax cuts on small business entities such as LLP's, LLC's, Sub Chapter S, partnerships. That is no coincidence; that is pricing in better profits thanks to lower taxes. It is a softball Mr. Experts. Hit it versus arguing the color of the ball.


Earnings: JNJ, UNH both jump guidance. IBM doesn't miss for once and says it will be profitable by Q4 (yes, the check is in the mail). For this market, that is good enough. buy, buy, buy. LRCS reports solid results and is up pre-market almost 3 clicks.

Miss: SCSS (TL, BL); who needs sleep?


Housing Starts, Sept: -4.7% vs -0.8% exp vs -0.2% Aug (from -0.8%)

Permits: -4.5%

Housing starts the lowest in a year, and WAY lower than the drop expected because of the storms. Even CNBC admits the housing market was 'stagnant' before the storms.


OTHER MARKETS
Bonds: 2.334% vs 2.30%

EUR/USD: 1.1762 VS 1.1771. Dollar a bit stronger

USD/JPY: 112.87 vs 112.21. Dollar continues its strength here as well

Oil: 52.20, +0.32. Oil continues its strength but is still at the top of the range, not breaking out yet.

Gold: 1280.20, -6.00. Gold continues is more recent weakness.


Futures remain strong into the open as the market is jumping off flat action on the large cap indices. LRCX helps lead chips higher with its earnings and we will see if that continues the chips' leadership.

DJ30 is relatively stronger in its pre-market move versus SP500, NASDAQ. As noted above, how small and midcaps perform in this more bullish move will be instructive. Heck, SP500 and NASDAQ as well as they are somewhat holding back on this early market move versus DJ30. How stocks finish today will be very important.





Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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