EmailThe U.S. equity market started 2012 on an upbeat note as the major averages all scored gains of 1.0% or better. Positive economic data in the form of better-than-expected manufacturing surveys in China, Europe, and the U.S. served as the catalyst for the buying interest.
The trading volume wasn't particularly heavy. Only 854 mln shares traded at the NYSE. That was up markedly from last week of course, although it was still lighter than the recent average and somewhat modest for the first trading session of a new month.
The relatively light volume suggests many participants are still trying to find their way with this market on a path of trepidation that has been laid with Iran's saber rattling, reports of record overnight deposits at the ECB, warnings of slower growth in China, and concerns about the upcoming earnings reporting season.
For the time being, it appears that yesterday's buying interest has died down. The S&P futures are down about five points -- nothing much, yet still a nod to an underlying sense of caution regarding the path forward for the equity market in the face of many familiar-sounding macro concerns.
There isn't much specific news to account for the hesitant tone, although we gather through a number of reports that a warning of a difficult period ahead for the Chinese economy from Premier Wen Jiabao, an indication in record overnight deposits at the ECB that European banks are sitting on their borrowed cash, and a disappointing rights issue from Italian lender UniCredit are receiving most of the attribution for the cautious disposition.
In light of those factors and the scope of yesterday's gains, it is notable that the S&P futures are down only five points.
Regular readers know that we have cautioned against reading too much into the futures indication. It is an opening indication and that is all. Moreover, we have cautioned against reading too much into the excuses for the market's disposition on any given day.
The slant of the futures market needs an explanation of course no matter how trivial or significant the causal factor is. Sometimes, though, it becomes readily apparent that the only thing as volatile as the equity market is the rationale offered for the swings in the market.
To wit, the futures can be down in the morning because of pessimism about the economic outlook, but if the cash market trades higher later in the day, it can be spun that stocks are higher because of optimism about the economic outlook.
In brief, we're sticking to the right to reserve judgment on the market's current stance. It can change in an instant on technical factors or with the passing of a key economic release like Friday's employment report.
Heck, it might even change with the Factory Orders report for November (Briefing.com consensus +2.1%; prior -0.4%) at 10:00 a.m. ET.
What is known today is that the market got off to a good start in 2012 and that there is still a long way to go in the week, the month, and the year.
--Patrick J. O'Hare, Briefing.com
Patrick J. O'Hare is Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.
