The election, earnings and interest rates appear to be the focus of the day today. Better than expected PMI numbers out of China are to blame for the latest dive in bond prices. China’s official manufacturing PMI rose to 51.2 in October from 50.4 in September, which was not only above expectations and the all-important 50 line, but also the highest reading seen since July 2014. In addition, the official non-manufacturing PMI came in at 54, which was also above expectations and an improvement from September’s reading of 53.7. In short, the PMI numbers suggest that the Chinese economy is doing a bit better than expected.

Mix in the better than expected GDP readings in the U.S. and you’ve got a recipe for increasing inflation expectations for the future, which, of course, causes bond prices to fall and yields to rise.

However, with the current earnings season coming in a bit better than expectations and stocks having fallen for five straight days, it looks like the bulls may attempt a rebound at the open today. But as we’ve learned over the past couple of months, it isn’t where the market opens that counts.

Current Market Drivers

We strive to identify the driving forces behind the market action on a daily basis. The thinking is that if we can both identify and understand why stocks are doing what they are doing on a short-term basis; we are not likely to be surprised/blind-sided by a big move. Listed below are what we believe to be the driving forces of the current market (Listed in order of importance).

    1. The State of the Election

    2. The State of the Earnings Season

    3. The State of Global Economies

    4. The State of Global Central Bank Policies

Thought For The Day:

People are habitually guided by the rear-view mirror and, for the most part, by the vistas behind them. -Warren Buffett

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