There is a nice bid in the futures market this morning. The S&P futures are up eight points, the Nasdaq 100 futures are up 29 points, and the Dow Jones Industrial Average futures are up 100 points, all of which suggest there will be a distinctly positive bias in the cash market when the opening bell rings.
The interesting thing is that there isn't any specific news item to account for the decidedly upbeat tone.
Some might point to the better-than-expected earnings report and reassuring outlook from home improvement retailer Lowe's (LOW), yet its stock is trading 2.3% lower in pre-market action.
Some might suggest it all boils down to tax reform optimism, yet it is just as easy to find a news article discussing why the tax bill won't pass as it is to find a news article discussing why it will pass.
The point being is that there is no news basis this morning that significantly improved the bill's chances of passing; hence, "tax reform optimism" is nothing more than a platitude to rationalize the stock market's upbeat attitude.
There is a positive bias in foreign markets, so the U.S. market is getting a little help from some carryover momentum.
Germany's DAX Index, for instance, is up 0.9%. That is remarkable considering that talks have failed in Germany to form a ruling coalition, throwing Germany into a swale of political uncertainty. Nevertheless, traders there have held fast to the notion that a worst-case scenario will not unfold, either because a political solution will be reached or because the ECB will do all that is necessary with its monetary policy to fill any confidence gaps.
Basically, the best explanation for why the futures market has the cash market on a fast-track to opening gains is that there are more buyers than sellers this morning in a thinly-traded market, and why that is probably boils down to an awareness that this time of year has often been accented with a positive bias in the stock market.
Traders, then, are pushing the tape on the pull of a seasonal narrative that tends to keep short sellers -- and sellers in general -- in a minority position.
That helps keep things propped up at the index level even though there might be some truly weak pricing action at the individual stock level. A few cases in point this morning are retailers DSW, Inc. (DSW) and Signet Jewelers (SIG), both of which are down 17% in pre-market trading after disappointing with their earnings results and outlook. Campbell Soup (CPB) is another laggard, trading down 8% on disappointing earnings results.
It isn't all peachy-keen even though the index futures suggest it looks that way, yet the index futures are the guide that dictates the market narrative. That narrative today is a positive one, which, if not grown on any specific news, is at least rooted in seasonality.