There is a bounce in the stock market's step this morning following Friday's deflating performance that left the major indices down between 1.9% and 2.3%.
The S&P futures are up 12 points and are trading 0.5% above fair value. The Nasdaq 100 futures are up 41 points and the Dow Jones Industrial Average futures are up 149 points.
The reversal of fortune has a lot of market followers fishing for headline causality.
The big catch they have made is the notion that Trump Administration officials "softened" their rhetoric on weekend news programs when discussing trade issues and tariff actions. Really, though, the remarks in aggregate had an ambidextrous quality to them, which is to say they left an impression that trade battles could go either way.
On a related note, Chinese officials sounded less diplomatic, noting that there are no trade negotiations happening at this juncture and that China stands ready with any countermeasures that are necessary to fend off U.S. trade restraints.
With this in mind, it is stretching the credulity of the trade headlines as being the basis for the positive bias.
The real basis from our vantage point is the manner in which the market closed on Friday. Yes, it was down sharply, but there was a bounce into the close following another successful defense of the S&P 500's 200-day moving average (2594).
Buyers showed up after that key technical level was breached and rallied the indices into the close. The 200-day moving average has been the line in the sand so to speak since early February, and while crossed at times, it has been a pretty solid line of support in the stock market's corrective move.
In that respect, then, it has stood out as the"bottom" in the corrective action seen this year; hence, there is some belief this morning that there will be at least a short-term pop for the stock market after another successful hold Friday at the 200-day moving average.
Some added support this morning for that outlook has come from other news items, such as the following:
- Morgan Stanley upgrading General Motors (GM) to Overweight from Equal Weight
- Boeing (BA) announcing that American Airlines (AAL) has ordered 47 787 Dreamliners valued at more than $12 billion at list prices
- Deutsche Bank (DB) trading 3.4% higher after naming a new CEO, effective immediately
- Merck (MRK) jumping 2.4% after its Keytruda cancer treatment met the primary endpoint in a Phase 3 trial dealing with treating metastatic non-small cell lung cancer; and
- Novartis (NVS) paying an 88% premium to acquire AveXis (AVXS) for $281 per share in cash or approximately $8.7 billion
There hasn't been any economic data of note out of the U.S., although Germany's trade balance report for February was weaker than expected. The CPI report for March, which will be released Wednesday, will be the focal point of this week's U.S. economic calendar.
Separately, the Congressional testimony of Facebook (FB) CEO Mark Zuckerberg on the data breach scandal and a speech at Boao Forum by Chinese leader Xi Jinping will also be closely watched items.
Both are important in their own respect, but the speech from Xi Jinping has more important global macro implications if he happens to address the recent trade spat.