It is May Day today, yet there is no emergency to report for the U.S. stock market. It is indicated to open higher with the S&P futures up five points and trading 0.2% above fair value.
The futures indication suggests what was lost on Friday should be found again when the opening bell rings. That salvation is rooted in several considerations that are keeping sellers at bay for the time being:
- First quarter earnings continue to impress, with the blended growth rate (actuals and estimates for companies that have not yet reported) up a healthy 12.5%, according to FactSet. This is a key consideration because the healthy earnings growth has happened without the support of tax reform and despite the stronger dollar.
- Apple (AAPL) and Facebook (FB) are the featured reporters on this week's earnings calendar
- Congress reached an agreement to keep the government running through September, which has taken the shutdown risk off the table for now
- Today is the first day of a new month, which often invites new inflows, particularly when the stock market continues to exhibit an underlying bullish bias
It is reasonable to expect trading volume to be on the lighter side today. Markets in Europe, China, Hong Kong, and Brazil are closed in observance of Labor Day.
Those closures will leave most of the lifting to U.S. participants, who will also be digesting a good bit of economic data today.
The Personal Income and Spending Report for March was released at 8:30 a.m. ET. It showed income up 0.2% (Briefing.com consensus +0.3%) after a downwardly revised 0.3% increase (from +0.4%) and spending unchanged (Briefing.com consensus +0.1%) for the second month in a row.
The lackluster spending activity was already reflected in the advance estimate for Q1 GDP on Friday, so that isn't a new headline shocker so to speak. In turn, the personal income figures were also embedded in the GDP report.
The key takeaway from the report is that it showed a deceleration in both the PCE Price Index and the core PCE Price Index year-over-year. That will temper concerns about the Fed being behind the curve in fighting inflation and it will quiet concerns about the Fed needing to be more aggressive in tightening monetary policy than is currently projected.
On a related note, the FOMC will be having a policy meeting on May 2-3. The market isn't a expecting a rate hike at this meeting.
The PCE Price Index declined 0.2% in March while the core-PCE Price Index mirrored the core-CPI report with a 0.1% decline. The March figures left the PCE Price Index up 1.8% year-over-year (vs. 2.1% in February) and the core-PCE price Index up 1.6% year-over-year (vs. 1.8% in February).
The March Construction Spending (Briefing.com consensus +0.4%; prior +0.8%) and the April ISM Index (Briefing.com consensus 56.5; prior 57.2) reports will follow at 10:00 a.m. ET.
The ISM Index will be of added interest today for two reasons: (1) China reported weaker than expected manufacturing PMI (51.2 vs. 51.8 expected) and non-manufacturing PMI data (54.0 vs. 55.1 expected) for April over the weekend and (2) this is a second quarter report.
This week will have its share of economic releases, with none more notable than the April Employment Situation Report on Friday.
Much can happen between now and then, and much will considering this is going to be another heavy week of earnings reporting, the Fed is holding its policy meeting, there will be a good bit of economic data, and healthcare reform and tax reform will continue to dominate the political headlines.
Hopefully, there are no emergencies to report at the end of this week, which begins today with May Day.