Pays to be in cash sometimes!
My target decline of 1940 on the S&P was breached today, but I genuinely think this is the bottom here. We should see a tight sideways market tomorrow as the bulls got a little carried away on Friday, so have been put in their place today. Therefore, caution should be the story now causing little movement tomorrow.
From a news point of view the only thing that could really set a spanner in the works to my view above is the Fed minutes that will be released at 2pm tomorrow. But I seriously doubt there will be any surprises there that haven’t already been priced into the market.
We also have the beginning of earnings season with Alcoa first up as usual, reporting after the bell tomorrow. If there is going to be a quick recovery from all the recent selling it would certainly help if earning season starts with Alcoa beating analyst’s estimates.
U.S. stocks fell sharply on Tuesday, extending losses into a second session, as investors fretted slowing economic growth in Europe and the potential impact on coming third-quarter earnings from U.S. corporations.
The CBOE Volatility Index jumped 11 percent to 17.22 and the Russell 2000 Index of smaller-cap companies shed 1.7 percent.
The International Monetary Fund downgraded its global growth forecast for this year and 2015, with the organization that represents 188 countries now projecting world growth to come in at 3.3 percent in 2014, down 0.1 percent from its July forecast. Next year, it expects growth of 3.8 percent.
German industrial output fell by 4 percent in August, with the worse-than-expected drop coming a day after the country’s industrial orders had their largest monthly decline since the global financial crisis in 2009.
The S&P 500 dropped 29.72 points, or 1.5 percent, to 1,935.10, its lowest level since Aug. 12, with industrials hardest hit and all 10 of its main industry groups losing ground.
The NASDAQ shed 69.60 points, or 1.6 percent, to 4,385.20.
Earnings: Alcoa, Costco, Monsanto, RPM International, Ruby Tuesday
7:00 a.m. Mortgage applications
8:30 a.m. Chicago Fed President Charles Evans
1:00 p.m. 10-year note auction
2:00 p.m. FOMC minutes
News Sources: CNN Money & CNBC