The futures market has a negative disposition in the early going. The S&P futures are down seven points and are trading 0.3% below fair value.
In explaining why the futures may be down, let's first dispel some of the popular notions why they are on the defensive.
First, they are not on the defensive because of worries the Fed might raise interest rates next week. That expectation was building all of last week when the S&P 500 increased 0.7% and hit a new record high above 2400.
Secondly, they are not on the defensive because China watered down its GDP growth expectations for 2017 to about 6.5%. That was expected to be the case based on reports leading up to the start of China's National People's Congress.
With those convenient explanations out of the way, we can examine other leading causes. The one that stands out above all others is the most straightforward explanation of all.
We'll call it the hub-and-spoke explanation.
The hub is the belief that the stock market has gone too far, too fast, and is due to get hit with some selling interest.
The spokes, then, that lead back to the hub include headlines like North Korea firing four ballistic missiles into the sea within Japan's economic zone, President Trump alleging that former President Obama ordered a wiretap of his Trump Tower offices, Delta (DAL) cutting its first quarter PRASM guidance since unit revenues in February were more moderate than expected, and Deutsche Bank (DB) announcing an $8.5 billion capital raise through the issuance of new stock.
There is room for other spokes, yet the point is that it is easy to make too much out of any particular item as being the proximate cause of the weakness when the reality is that the market is simply overextended on a short-term basis and due to take a breather of some kind.
There isn't much in the headlines this morning that skews decidedly positive in broad market terms, so the attraction for incremental buyers at this juncture isn't there at the moment.
One shouldn't really expect the Factory Orders Report (Briefing.com consensus +1.0%) at 10:00 a.m. ET to provide much of a buying spark either. That's because it is a January report.
That is the lone piece of data on the economic calendar this week, which will feature the February Employment Situation Report on Friday.