EmailIt was a struggle for the equity market last week as each of the major averages declined at least 2.0%. If the current futures indication holds up, however, the cash market should be poised to recoup a modest portion of those losses when trading begins this week.
There has been a positive bid in the futures market throughout the morning, with foreign developments reportedly setting the tone.
In particular, China's trade balance report for September showed a 9.9% increase in exports. That gain has tempered some concerns about the global economic slowdown, yet a small 2.4% jump in imports has continued to feed concerns about domestic demand in China.
The interesting paradox is that China is being seen as the bearer of good economic news that lifted foreign equity markets, yet China itself traded lower on Monday (-0.3%). This, and the recognition that industrial metals are weak this morning, makes us think China's trade report is getting more credit than it is due for the positive bias. On a related note, Goldman Sachs cuts its price forecasts for copper, aluminum, zinc and nickel this morning, citing concerns about demand from China.
Another catalyst for the boost in the S&P futures overnight were reports of conciliatory remarks out of Germany regarding Greece's position in the eurozone and the thought that Spain may request a bailout in November. Same story, different day.
Elsewhere, Softbank has made an approximately $20 bln offer to acquire 70% of Sprint Nextel (S). This courtship was in the market last week, although the market is garnering some support today from the understanding that the price tag is bigger than first thought.
Most of the gains in the S&P futures market were achieved by 5:30 a.m. ET. Better-than-expected earnings results from Citigroup (C) and a better-than-expected retail sales report for September, however, have acted as underpinning factors.
In typical fashion, there were a number of items influencing Citigroup's results. The bottom line is that Citigroup beat the Capital IQ consensus estimate by seven cents after excluding the special items. Shares of Citigroup are trading nearly 2.0% higher in pre-market action and are providing a boost for other financial names.
Things are just getting going on the earnings reporting front. This week will see 80 S&P 500 companies report their third quarter results.
Separately, there was a lot to like about the retail sales report. Total sales jumped 1.1% on top of an upwardly revised 1.2% increase (from 0.9%) in August. Excluding autos, retail sales also rose 1.1% versus an upwardly revised 1.0% increase (from 0.8%) in August.
Sales gains were achieved in every major category, with the exception of miscellaneous store retailers (-0.1%). Department stores, which is a subgroup of general merchandise stores (+0.3%), saw a 0.2% decrease in sales. Core retail sales, which exclude autos, gasoline station, and building materials sales, increased 0.9%.
The S&P futures are up eight points and are trading 0.4% above fair value.
One can choose their catalyst this morning. Either way, the cash market is poised to start today's trading on a higher note. Where it goes from there will be the key thing to watch.
