Are Thin Volumes Overstating the Case? - Ahead of Wall Street

By Zacks | August 18, 2014 AAA

Monday, August 18, 2014

U.S. stocks are indicated to follow the lead from European indexes which rebounded today on hopes of improvement in the Ukraine situation. But seasonally thin volumes have a way of exaggerating market moves, and today and the rest of this week will be no different on that front.

Geopolitical developments have been the dominant market driver lately, though worries about the Fed aren’t that far from investors’ minds either. The key issue on the Fed front pertains when they will start the tightening cycle at they complete the QE unwind later this fall. The consensus view is of a mid-2015 timeframe, but some in the market are justifiably concerned that the central bank could be underestimating the strength of the recovery and could fall behind the curve.

The U.S. Fed’s track record in proactively foreseeing turning points in the economy isn’t that impressive, to say the least. This concern is in-line with the views of some FOMC officials, but definitely not that of the committee’s majority as well as the Chairwoman’s. Minutes of the last FOMC meeting coming out on Wednesday afternoon as well as speeches at the Jackson Hole conclave later this week will likely mirror these views.

In corporate news, Dollar General (DG) is making a bid for Family Dollar (FDO), trumping the existing offer from rival Dollar Tree (DLTR). Dollar General is the biggest operator in the deep-discount space and is hoping to really bulk up by acquiring the number 2 player in the space, giving it greater rural foothold and nationwide footprint of roughly 20 thousand outlets in 46 states. The bid is in-line with activist investor Carl Icahn’s wishes, who had pressured Family Dollar into putting itself on the block.

Sheraz Mian
Director of Research

 
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

comments powered by Disqus
Related Analysis
  1. The Days of BABA Are Upon Us - Ahead of Wall Street
    Stock Analysis

    The Days of BABA Are Upon Us - Ahead of Wall Street

  2. Bull of the Day: Deckers (DECK) - Bull of the Day
    Stock Analysis

    Bull of the Day: Deckers (DECK) - Bull of the Day

  3. Bear of the Day: Copa (CPA) - Bear of the Day
    Stock Analysis

    Bear of the Day: Copa (CPA) - Bear of the Day

  4. U.S. Restaurants Slog Through a Weak Industry - Industry Outlook
    Stock Analysis

    U.S. Restaurants Slog Through a Weak Industry - Industry Outlook

  5. Fed Comments Should Spur Positivity - Ahead of Wall Street
    Stock Analysis

    Fed Comments Should Spur Positivity - Ahead of Wall Street

Trading Center