The S&P 500 closed at a new 5-year high Thursday, aided by China's better-than-expected trade report, a late boost in Apple (AAPL), and speeches from voting FOMC members George (Kansas City) and Bullard (St. Louis) that were less hawkish than feared.
Thus far, there hasn't been much follow-through this morning. Some weak industrial production numbers out of Europe (Spain and the UK), a higher-than-expected inflation reading out of China (+2.5% yr/yr), and an earnings report from Wells Fargo (WFC) that featured a slight contraction in its net interest margin (-10 bps to 3.56%) have capped the market's buying enthusiasm.
There were no such caps in Japan, however. The Nikkei jumped 1.4% to a new 23-month high after the announcement of a $116 bln economic stimulus plan.
Outside of Japan, most major foreign markets have encountered some selling pressure. Losses have generally been contained below 1.0%, with the notable exception of the Shanghai Composite (-1.8%), which got tripped up by the belief that China's inflation reading will deter any further stimulus.
Notwithstanding the weak data out of Europe, the euro is up 0.6% against the dollar this morning with the bulk of that move unfolding in the last 30 minutes. The euro is at its highest level (1.3342) since April.
Coincidentally, so is the US trade deficit, which ballooned to $48.7 bln in November from $42.1 bln in October.
Imports jumped $8.4 bln from October levels, led by cell phones (+$1.8 bln) and pharmaceutical preparations (+$1.26 bln). Exports increased by $1.7 bln, paced by a $552 mln increase in exports of nonmonetary gold.
The futures market churned a bit in the wake of the trade report. The internals of the report offer some mixed signals about demand patterns, but the one clear message in the November trade report is that it will have a negative impact on Q4 real GDP.
The stock market of course has moved past Q4. One could argue that it has moved past Q1 and Q2 as well, but that's an argument for a different day.
The day in front of us is expected to start on a relatively flattish note. After that, it will be a test to see whether the market extends its breakout or moves back into a consolidation mode ahead of next week's earnings reports.