The stock market had a little flashback rally on Thursday, riding the rails of optimism about Congress approving health care reform and then working its way toward approving tax reform by the end of the year. None of that is guaranteed of course, yet the tenor of the headlines reawakened the possibility for a stock market that has been having some serious doubts of late about the Trump Administration's pro-growth agenda.
Things got rolling on press reports suggesting the Freedom Caucus of the House GOP and the moderate wing of the House GOP were seeing eye-to-eye on a possible health care reform compromise. Treasury Secretary Mnuchin then said later in the day that the administration is pretty close to announcing a major tax reform plan.
It was the perfect distraction for a market that has also been distracted of late by geopolitical concerns. In fact, it was such an effective distraction that the market all but ignored the report of another terrorist incident in France that sadly claimed the life of a police officer there and presumably bolstered the election chances of Marine Le Pen, the far-right candidate with a nationalist bent and an anti-EU vision.
The S&P 500 tacked on nearly 18 points, or 0.8%, getting an added boost from good earnings news and some short-covering activity. Strikingly, it moved back above its 50-day simple moving average intraday, but just as strikingly, a closing volley of sell orders left it just shy of its 50-day simple moving average on a closing basis.
That technical shortcoming - slight though it might be - and the specter of the French election this weekend has cooled some of Thursday's buying interest.
Nevertheless, the market is indicated to open slightly higher, as the S&P futures are up two points and trading 0.1% above fair value.
Better than expected earnings from Visa (V), General Electric (GE), Honeywell (HON), SunTrust Banks (STI), Kansas City Southern (KSU), and Stanley Black & Decker (SWK) are helping to prop things up.
If the first round of voting in the French presidential election wasn't viewed as such a key, near-term risk event, we suspect the opening indication would be more robust than it is, but with the time for voting now at hand (it happens Sunday), there is some respectful deference that seems to be holding the market back some.
Given the relatively insouciant manner with which the major European markets are trading today (many are sporting modest gains and the CAC 40 is down only 0.1%), we can't help but wonder though if the U.S. stock market will try to get its rally groove on again.
The potential is there since it stands to benefit from a potential relief rally next week if the first round of the French election doesn't produce the worst-case scenario of a run-off between the far-right candidate Le Pen and the far-Left candidate Melenchon.
Also, it won't be lost on some traders that if European equity markets went into a tailspin on the election result that the U.S. stock market will likely show a posture of relative strength, particularly if Congress can avoid a government shutdown next week and the tax reform conversation can advance with positive-sounding connotations.
There's a lot to consider at the moment and the Existing Home Sales Report for March (Briefing.com consensus 5.58 million) at 10:00 a.m. ET will be another item in the mix.
Today, incidentally, is also an options expiration day. That should drive an increase in trading volume even if it doesn't definitively drive the market one way or another.