Weak jobs data indicating expectations of no change in QE program from the FED – Economic Highlights

The Fed isn’t expected to announce any changes this afternoon, but it’s assessment of the economic picture will provide useful clues to the Taper timeline. At the September meeting, they had described the pace of economic growth as ‘moderate’, an upgrade from the ‘modest’ descriptor they had used before. It will be interesting to see how they describe the underlying economy now, particularly with the government shutdown believed to have taken a bite out of Q4 GDP growth as this morning’s ADP shows.

The market’s attention is justifiably on the Fed, but we are also in the midst of the Q3 earnings season. Just like economic data, the earnings season is neither too hot, nor too cold. Earnings aren’t great, but they aren’t terrible either. The overall level of earnings remains quite high, though there isn’t much growth. The market seems to be ok with that, particularly if the Fed continues to remain on the QE beat.

Including this morning’s reports from General Motors (GM), Comcast (CMCSA), and others, we now have Q3 results from 310 S&P 500 members that combined account for account for 68.2% of the index’s total market capitalization. Facebook (FB) will be reporting after the close today. Total earnings for these 310 companies are up +6%, with 67.4% coming ahead of consensus earnings expectations. Total revenues are up +3% and 49.7% are beating top-line expectations.

This is better performance, particularly on the earnings side, than what this same group of companies reported in Q2 and the 4-quarer average. The variance of the last few quarters is particularly notable outside of the Finance sector, which has picked up this quarter. The growth pick up in the Technology sector relative to what we have been seeing in recent quarters spotlights the ex-Finance improvement, though the growth pace in other sectors like Transportation, Energy and Basic Materials has also improved.