3 Potential Events That May Move This Market

 | Mar 13, 2018 | 7:59 AM EDT
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'Every why hath a wherefore'

- William Shakespeare

Over the past six weeks market volatility has picked up primarily as a function of stronger reactions to news events. The indices danced around, and ended up with a positive reaction, to the tariff and trade war news and is now looking quite complacent as it looks ahead to the next event that may trigger computer buying or selling and some increased movement.


The first event on the agenda is the CPI data which is due out this morning at 8.30 am ET. Core CPI is expected to increase 0.2%.

Inflation is still at very low levels but a 'hot' reading may confirm the likelihood that the Federal Reserve will raise rates four times, rather than three times, in the year ahead. There clearly has been upside pressure on rates this year but it is not yet having any major influence on equities.

The bears have long believed that it is interest rates that will eventual kill this long-running uptrend but strong economic growth and low levels of inflation are preventing that thesis from gaining traction. A stronger than expected CPI number may cause some concern this morning but it is going to take some big increases in inflation to really have an impact on equities.

Deal Making in the Technology Sector

President Trump is blocking Broadcom's (AVGO) hostile takeover of Qualcomm (QCOM) on national security concerns. This is not a huge surprise as it is consistent with the protectionalism inclination the President Trump has expressed.

For our purposes the important issue is whether this will have any impact on the technology sector, which has been a market leader recently. The likely answer to that is 'no'. While it does remove one potential positive and it is likely more than offset by the focus it puts on combating unfair competition from China when it comes to protect US technology. It is likely a net positive that the technology sector is receiving greater support in dealing with countries that want to appropriate US technology


There is a special Congressional Election today in a heavily Republican district in Pennsylvania. This is being a portrayed as a referendum on President Trump and may be foreshadowing of the results of the upcoming mid-term elections. We have seen this situation before where political pundits have wrongly predicted a poor outcome for the President so it will be very interesting to see the results tonight.

This market obviously is embracing President Trump's economic policy so the market issue is whether the loss of the Pennsylvania seat will cause concern about the potential for the Republicans losing its control of Congress in the mid-terms. On the other hand, will a win for the Republicans give the market confidence that market friendly economic policy will continue?

This event may not be of monumental importance but it is the sort of binary situation that allows the computer algorithms to do their thing. Expect to see some swings tomorrow morning on this news.

Overall price action remains positive, the indices are pushing higher and, although there are some extended charts, individual stock picking remains robust. A little softness here would actually be a positive but there is no reason to anticipate a major reversal at this time.

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