Following a rough week in stock market trading that saw a massive market sell-off, investors were optimistic Monday, as news coming from the European Central Bank over the weekend indicated a cut to its key interest rate. There was also renewed hope that a meeting between Eurozone leaders could provide a solution to the troubles plaguing the region.
Last week, investors turned to Treasuries and the US dollar as concerns that central banks have used all of their options to boost the economy. Lack of direction on the part of world leaders caused the market to trade at the lower end of the past six weeks trading range.
A specific plan to save Greece, a TARP style bailout for troubled French banks, and/or a statement as to a cut in interest rates from the Central Bank could propel stocks higher, and investors should pay close attention to the news and earnings reports in the week ahead.
European stocks were on the rise in late trading, with the FTSE in London up by as much as 1.5%, closing up 22.56 (0.45%), and the Dow Jones Industrial Average futures up 120 points in pre-market trading, with markets trading upwards of 100 points by mid-afternoon. European stocks were assisted in paring losses by gains in bank shares.
Stock Market Trading: Stocks To Watch In The Week Ahead
It is far from easy to develop a game plan for stock market trading in this type of market, as individual company news has been overshadowed by global economic concerns. This does not mean that investors should not be paying attention to what companies are saying, and many are set to report excellent numbers.
Investors will need to keep track of three key things in the week ahead, politics, finance, and economics in order to find the best places to invest your money. As high quality stocks reporting fantastic earnings, such as Oracle, had the misfortune of reporting in the midst of a host of rumors concerning banks, suffered greatly last week, it just goes to show investors that a company’s performance may not necessarily be the most important factor in this type of market.
Before the bell on Tuesday, September 27th, Walgreen (WAG) is set to report earnings, and analysts are expecting the company to report excellent numbers due to improvements in prescription drugs, as well as in the front part of the store. Walgreen is set to roll out the new flagship store across the country, and could be a stock to watch going into its earnings report.
Investors should also be watching Paychex (PAYX) for what some consider to be a more accurate reflection of the health of the labor market, as this company handles payroll for hundreds of thousands of corporations. These numbers could give investors a read on the data for September.
Stock Market Trading Amidst The Possibility Of (Another) Government Shutdown
Mid-afternoon on Monday saw the US stock market trading higher, but with the threat of -another! – possible US government shutdown, one should look to the currency market for potential gains. While the dollar has been a traditional safe-haven for investors nervous about the troubles in Europe, there may be a profitable trade in the GPB/CAD according to top analysts.
In both instances of a US government shutdown (in 1994 and 1995) the British pound fell against the Canadian dollar. Selling at around 1.5965 with a target of 1.5650 and a stop of 1.6025 is the analyst’s recommended play in light of uncertain situation in Washington.
As investors become more adverse to risk, the British pound has typically weakened. It makes sense to trade the pound versus the Canadian dollar rather than the US dollar as it would be difficult to gauge how the greenback would react in the event of a shutdown.