EmailThe good news is that the market is indicated to open higher. The S&P futures are up twelve points and are trading 1.1`% above fair value.
The bad news is that there isn't anything substantive behind the expected gains. It is all just fluff. Sometimes, though, fluff is enough for a short-term oversold market.
Reportedly, the fiscal cliff discussions are imbued with a spirit of compromise. That is the fluff. The reality is that there is no compromise yet.
Egypt is said to be working on orchestrating a ceasefire in the Gaza Strip. That is the fluff. The reality is that missiles are still being fired and oil prices are up 1.2% today to $87.94 per barrel.
Eurozone finance ministers will be meeting tomorrow to try to figure out an extended bailout plan for Greece. That is the fluff. The reality is that there is serious disagreement between the EU, the IMF, and Germany over concessions that need to be made to extend Greece's bailout plan.
Third quarter earnings have been better than expected. That is the fluff. The reality is that "better than expected" is still weak. Third quarter earnings are expected to be flat while third quarter revenue is expected to be down 0.8%.
The fluff is the stuff early gains will be made of, however.
The early bias is indicative of the belief that positive outcomes will be reached so that the equity risk premium will be reduced.
Foreign markets appear to be aligned with this thinking, as most posted gains in overnight trading.
The risk-on mentality is pressuring Treasuries in the early going. The 10-year note is down 11 ticks, with its yield up 3 bps to 1.61%.
The Existing Home Sales report for October (Briefing.com consensus 4.70 mln; prior 4.75 mln), which will be released at 10:00 a.m. ET, promises to be another market driver.
With the Thanksgiving holiday on Thursday, this week's economic reporting will be completed on Wednesday. Housing starts data follows tomorrow while the weekly initial claims and leading indicators reports highlight Wednesday's calendar.
The Thanksgiving week often sees some positive trading activity. According to the Stock Trader's Almanac, the day before and after Thanksgiving combined have seen only 12 losses in 59 years.
The spirit of Thanksgiving might be a factor in the early bid this morning. No one can say for certain, but from our vantage point, it looks as if the S&P futures are stuffed with some fluff at the moment.
