IRIS Wealth Creation & Management

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Daily Market Summary & Analysis, OCT 6th, 2010

Today the U.S. equities market took a breather after the S&P 500 had its highest close since MAY 12, 2010. At 8:15AM EST ADP National Employment Report stated that “job creation remains surprisingly anemic”. September had a decline in ADP payrolls, down -39,000. This is disappointing as Wall Street economists were expecting +20,000 and the data showed the first decline, following a 7 straight monthly increase. ADP August payrolls revised up +10,000 from down -10,000. 

More sober news came from the International Monetary Fund on Wednesday. The IMF slashed U.S. GDP growth for both 2010 and 2011, from 3.3% to 2.6% and from 2.9% to 2.3% respectively. This is the largest downgrade from the IMF, citing reasons such as weak job creation and a slow down in consumer spending. Canada is the leader in economic growth among seven major industrialized countries G7, this year and next, with a GDP growth of 3.11% for 2010 and 2.7% in 2011. “And China’s growth is estimated to be 9.6% in 2011, slightly below 10.5% in 2010,” said the IMF.

The DOW’s high of the day was 10,974.01 before 12PM EST and closed at 10,967.65, up +0.21%. This is the third time the index fail to climb above the 11,000 level  in recent rally. Minor profit taking sent the two other major indexes to close in red. Nasdaq closed at 2,380.66, down -0.80% and the S&P 500 down -0.07% to 1,159.96. 

Technically, the S&P 500 has a strong support at 1130 and 1118.77, its 200d-MA. Resistance are the MAY high at 1173.57 and 1200. We are coming into earning season, thus, investors have good reasons to be skeptical. Wall Street analysts believe that the market will eventually go above the 1200 level due to several reasons. Midterm election historically is a positive catalyst for the equities market with an average of 18% gain for the S&P 500. Good earning stories will also install investors’ confidence. And lastly, fund managers will likely to chase performance in the last quarter of the year.

Best regards to all, and good luck in your trading. 

Disclosure: No positions in stocks or ETFs mentioned at the time of writing.


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