[MM_Member_Data name=’firstName’],

U.S. markets closed mixed on Thursday after battling back from early morning losses of roughly 1%. The Dow and S&P 500 extended their winning streaks to five-straight after gaining positive territory ahead of the closing bell.
The Russell 2000 also rebounded off its morning low to trade into positive territory before finishing slightly lower while holding the 1,500 level.
Meanwhile, the Nasdaq was the weakest link, after falling 0.3%, but was able to hold the 6,600 level. Consumer Staples, Technology and Energy were the sector laggards, falling 0.5% and 0.3%, respectively, for the latter two. Utilities showed strength after rallying 1% while the Health Care sector advanced 0.6%.
3Q earnings season has gotten off to a good start with over a tenth of the S&P 500 companies reporting thus far. Total earnings for the S&P 500 members that have reported already are up 13.3% from the same period last year on 6.9% higher revenues. Companies topping EPS estimates are near 77% with 73% beating revenue estimates.
Total Q3 earnings for the S&P 500 index are expected to be up 3% from the same period last year on 4.9% higher revenues. Q3 growth is on track to be the lowest this year, following double-digit growth in each of the first two quarters of the year, and earnings growth in the last quarter of the year currently expected at 9.1%.
 
Earnings growth is expected to turn positive in Q3 for the small-cap S&P 600 index, with total earnings for the index expected to be up 8.3% from the same period last year on 5.2% higher revenues. This would follow persistent earnings declines for the S&P 600 as earnings growth has been negative in 3 of the last 4 quarters.
For full-year 2017, total earnings for the S&P 500 index are expected to be up 7.1% on 4.6% higher revenues, which would follow 0.7% earnings growth on 2.2% higher revenues in 2016. S&P 500 index earnings are expected to be up 11.8% in 2018 and 9.2% in 2019.
 
 
Global Economy – European markets traded to the downside as rising tensions between Spain and Catalonia spurred liquidation and pushed the volatility index up to a 5-week high. The Stoxx Europe 600 tumbled 0.6% and Germany’s DAX 30 stumbled 0.4%. UK’s FTSE 100 and France’s CAC 40 dropped 0.3% while the Belgium20 declined 0.2%.
In a response to a Thursday deadline set by Spain for the state of Catalonia to renounce its claims to independence, Catalan President Puigdemont said his state may declare independence from Spain unless the government in Madrid agrees to talks.
Spanish Prime Minster Rajoy said the Spanish government will start the process of taking direct control of the Catalan regional administration under Article 155 of Spain’s Constitution unless the Catalan government steps back from its push for independence.
Asian markets closed mixed with Japan’s Nikkei rising 0.4% to a 21-year peak. Hong Kong’s Hang Seng Index sank 1.9% while South Korea’s Kospi and China’s Shanghai index fell 0.4%. Australia’s S&P/ASX 200 added 0.1%.
The Japan September trade balance widened to a surplus of 670.2 billion yen, larger than expectations for a surplus of 556.8 billion yen.
Japan’s September exports rose 14.1% year-over-year, weaker than expectations for a gain of 15%. September imports rose 12% year-over-year, weaker than expectations for a rise of 14.7%.
China Q3 GDP rose 6.8% year-over-year, matching expectations.
China September industrial production rose 6.6% year-over-year, topping expectations for 6.5%.
For the week of 10/14, Jobless Claims were at 222,000 versus consensus of 240,000.
October Philadelphia Fed Business Outlook Survey General Conditions Index came in at 27.9, topping expectations of 20.2.
Bloomberg Consumer Comfort Index Level was at 51.1 for the week ending 10/15.
September Leading Indicators down 0.2% to 128.6 versus consensus for a gain of 0.1% for the month.
 
Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) rebounded after trading to a high of $126.01 to clear upper resistance at $125.25-$125.50 but a level that failed to hold. Fresh hurdles are at $126 and the 50-day moving average, if cleared, with continued closes above the latter being a bullish development.
Support remains at $125-$124.50 with risk to $124-$123.50 on a move below the latter.
Market Analysis- The PowerShares QQQ (QQQ) traded to a low of $147.27 following the surge and breakout above $146 earlier this month. This level represented late August and mid-September resistance and will try to serve as near-term support on a close below $147.25-$147.
Lowered resistance is at $148.50-$149. RSI failed July resistance at 70 and appears to be headed for a drop below the 60 level.
The Consumer Staples Select Spiders (XLP) recently failed to hold resistance at $54.75-$54.50 and the 50-day moving average following Monday’s drop below these levels. Today’s backtest to $53.85 held July and early October support at $53.75-$53.50 with a move below the latter being a continued bearish development.
A close below $53.50 would likely lead to a continued backtest towards $52.50-$50. The 52-week low is at $49.98. Current resistance is at $54.25 and the 200-day moving average.
The 50-day moving average remains in a downtrend and appears to be headed below the 200-day moving average. This would form a death cross and represent another bearish signal. RSI is showing signs of continued weakness and a backtest towards 40-35.
All the best,
Roger Scott