By Carlos Guillen
Equity markets are making another encouraging move to the upside after an amazing jump of 323 points yesterday that was fueled by positive comments from Washington. Despite declining sentiment data out earlier today, news that House Republicans were offering to pass legislation to avoid a default and end the government shutdown have served to enthuse investors once again.
A bit mixed today was that consumer sentiment landed higher than expected but declined for the fourth consecutive month. The University of Michigan's Consumer Sentiment October result landed at 75.2, higher than the Street's expectation of 74.5, decreasing from the 77.5 reached in September and reaching the lowest level since January of this year when it was 73.8. Given the close relation between consumer sentiment and consumer spending, this fourth consecutive month of sentiment decline may be indicative of slowing consumption this coming holiday season. Apparently, mortgage interest rates that are near two-year high levels along with slowing jobs additions to the employment backdrop are having a detrimental effect to confidence. Recalling last month the ADP non-farm payroll result, we saw that the increase in non-farm payrolls was 166,000, down from 176,000 in August, while the Street's consensus called for a gain of 170,000. Also not very encouraging was the index of expectations six-months from now, which more closely projects the direction of consumer spending, declined to 63.9 in September from 67.8 the month before.
Today's upward move in stock indexes also came despite some mixed earnings result from banking giant J.P. Morgan Chase that reported a quarterly loss, its first under Chief Executive Officer Jamie Dimon; however Wells Fargo reported a 13 percent increase in third-quarter profit, even as its mortgage banking income declined steeply.
At the moment, investors are feeling more confident that the situation in Washington will be fixed soon, and the ball still rests in the White House, but we are pretty certain a deal well be reached to avoid default and end the shutdown.