Daily Futures Commentary October 5, 2009

Monday, October 05, 2009

Look for today’s U.S. ISM Non-Manufacturing Index to move the markets today. Traders are looking for a rise from 48.4 in August to 50 in September. A number greater than 50 should trigger increased demand for higher yielding assets.

Equity markets are trading a little better overnight. The combination of oversold conditions along with expectations of a better ISM number is helping to trigger an early short-covering rally.

Traders are also bracing for the start of earnings seasons on Wednesday. This is going to be the key to driving the stock markets to the next level. During the first quarter the rally was triggered by cheap stocks and bargain hunting. The second quarter rally was fueled by better than expected earnings because companies cut expenses. Investors want to see evidence of more earnings growth during the third quarter, but they must be driven by increased revenues.

Treasury markets are trading higher overnight, but could turn south quickly if the ISM number comes out better than expected. Last Friday’s closing price reversal top in the December Treasury Bonds indicates that the rally may be finished at least temporarily.

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