Why Earnings Still Matter

What’s in Today’s Report:

  • Why We Can’t Get Complacent on Earnings
  • Dow Theory Turns Positive

Futures are marginally higher after China cut interest rates, although the cut was less than expected.

China cut its Loan Prime Rate (LPR) by five basis points.  The rate cut was expected but it was supposed to be a 10-15 basis point cut, so the action isn’t as strong as hoped for and Chinese economic growth will remain a concern.

Economic data was sparse overnight as Japanese CPI met expectations at 0.5% yoy.

Today there aren’t any economic reports but there are several Fed speakers, including Bullard who already spoke and was dovish (which isn’t a surprise, he wanted a 50 bps cut this week).  The most important speaker today is Williams (8:15 a.m. ET) as he’s considered part of Fed leadership, and if he advocates for more cuts that’ll be a dovish tailwind on stocks.  Other speakers today include Rosengren (11:20 a.m. ET) and Kaplan (1:00 p.m. ET).

On U.S./China trade, the staffer meeting in preparation for the October meeting will continue, and absent any “real” news today any chatter that’s positive on U.S./China trade and/or dovish will help stocks rally.