EmailS&P futures suggest a modest up open. That is impressive given the strong Friday gains and the fact that Mondays have been down days through June and July.
There isn't a whole lot of rationale for the resilience this morning. The purported good news is that the Spanish 10-year bond yield is all the way down to 6.74%. A 6.74% rate compounds very quickly and is well above inflation rates or the nominal rate of growth in Spanish GDP for the foreseeable future. Nevertheless, it is a well-known axiom of the market that a rate over 7% is unsustainable, but a rate under 7% (even 6.99%) is just fine.
There are no economic releases today. Earnings season is winding down, and the reports are mostly from companies that won't have broad market impact. Utilities, health care, and smaller consumer companies are filling out the calendar. The biggest reports this morning are from Tyson Foods (missed on earnings), utility company AES (also missed), and health care provider HCA (beat on earnings). Nothing much to worry about.
The stock market is running on momentum, backed by the belief that the Fed and the European Central Banks will be there when needed. It isn't their job, however, to ensure stock market gains. Global economic growth is slowing and there is a real risk that aggregate earnings on the S&P 500 will be down in the third quarter. Those fundamentals will have to be taken into account at some point.
This morning's Big Picture column reviews our GDP outlook for the remainder of the year. Our forecast is for sub-1% growth in the second half.
Founder and Chairman, Briefing.com
