Market Direction Week of April 24, 2017©

Market Direction: BULLISH alert issued 11/10/2016

Last Week Review: First-quarter earnings season is under way, with about 10% of S&P 500 companies reporting results so far. As usual, many industrial and financial services companies have been the first to report, and results to date have been encouraging.

Investors are looking for signs of improving business investment and manufacturing activity as leading indicators for industrial companies. While only a fraction of the sector has reported at this stage, some firms have provided upbeat commentary that activity levels have in fact begun to improve following a difficult 2016. While plenty of uncertainty exists, especially regarding regulation, it is encouraging to see the industrial economy improving.

Another key support to higher stock prices is optimism about the Trump administration's pro-growth policy changes. Infrastructure spending, lower taxes, and faster GDP growth leading to higher interest rates.

How the market finished last week, the S&P 500 up 0.8%, the Nasdaq up 1.8%, and the Dow up 0.5%.

This Week: There are two key market moving events looming on the horizon that traders should keep an eye on next week. The first round of the French Presidential elections on Sunday 4/23), in which a strong showing by populist candidate Marine Le Pen, could cause volatility spikes in Europe and the US. While the French election process is different than the process in the US, this event is likely to impact the overnight futures before the open on Monday morning (4/24). Additionally, the first look at Q1 GDP on Friday (4/28), which could be as low as +0.5%; that would be the weakest quarter in 3 years. While there is a historical pattern for Q1 to be the weakest of the year and also subject to higher revisions, a result that weak will likely cause a negative reaction in the market before the open on Friday, and bring President Trump’s highly optimistic GDP growth forecasts into question again.

While encouraging comments on tax reform from Treasury Secretary Steven Mnuchin, combined with news that a new healthcare reform bill may be in the works lifted markets on Thursday (4/20), optimism quickly waned on Friday as reality came back to the forefront. Next week could be another bumpy ride.

Economic Calendar: Chicago Fed National Activity Index (4/24), Consumer Confidence (4/25), Durable Goods Orders (4/27), International Trade in Goods (4/27), GDP (4/28)

Some of the major earnings announcements on deck: CAT, CMG, GOOG, AMZN, MCD.

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