Jack Ablin
Jack Ablin
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The tick up in oil prices hurts, but history has shown that interest rates have a much bigger impact on the stock market than oil. And looking at the ISM services number, you're seeing the kind of gradual, lazy improvement in the economy that's not going to really get rates going.
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But the key here is really going to be guidance. Everyone is looking for signs of the rolling over of profit growth, although not as much as the Fed or higher energy prices might indicate.
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We're still getting more negatives on the economic front today, and this is a period where we're really looking for economic growth to avoid a Fed rate cut.
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After looking at the employment numbers, there is no doubt in my mind that the measured language remains. Knowing what we know now, there's no pause in 2005.
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The confidence report really personifies what's going on in consumers' minds right now. Investors are looking at Katrina and Rita as a one-two punch for the economy.
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With light volume, we're going to bounce around like a ping-pong ball. I wouldn't take any moves this week as a clear indication of anything.
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The world assumes the Fed will raise the rates by a quarter percentage point, that's a non-event. It's what the statement lays out about the pace of future rate hikes that will be important, because that's what people are thinking about. I think the inflation reports will also be pivotal next week.
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Earnings are still the engine and the market is not overvalued, but the environment we are in is creating pressure.
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There's really not a lot of information here to work with, and I think the market's taking a rest.
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Right now, we have this positive confluence of earnings and economic news that has been propelling the market.
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Right now, the transparency we had with (former Chairman Alan) Greenspan is gone. We're trying to get some semblance of which way the Fed is going to go.
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Raising rates by more than 25 basis points would shock the market so much that the Fed's credibility would vanish.
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People are taking some comfort in results and a feeling that the economy is getting better, but there's still some caution. We need to see more evidence of a sustainable recovery. We need companies to start seeing profits more through top-line growth than just cost-cutting measures.
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Between leading indicators and subdued inflation expectations, it's really set a nice backdrop for the market today,