The stock market had the best possible finish last week to what had been shaping up to be another losing week. The gloves came off late on Friday, though, and the bears were knocked to the mat with an upper cut over the final 90 minutes of trading that pushed the S&P 500 back above its 50-day simple moving average.
The trading volume wasn't particularly heavy on Friday, but that's because sellers were generally lightweight fighters.
There has been some carryover punch this morning by the bulls, too.
The S&P futures are up 9 points and are trading 0.4% above fair value. The Nasdaq 100 futures are up 24 points and the Dow Jones Industrial Average futures are up 125 points, leaving them up about 0.5% to 0.6% above fair value.
To say things are back to normal for this stock market would be an overstatement, yet it is fair to say that things feel like they are settling down after the roller-coaster start to February.
The CBOE Volatility Index is back under 17; the 10-yr note yield is at 2.84%, down 11 basis points from its high following the release of the FOMC Minutes, and the fourth quarter earnings reporting period is winding down with a renewed emphasis on how good it was.
According to FactSet, the blended earnings growth rate for the S&P 500 is 14.8% and the blended revenue growth rate is a robust 8.2%. Those are the highest growth rates, respectively, since the third quarter of 2011.
The remarkable thing is that every quarter in 2018 is anticipated to produce even stronger earnings growth. For all of 2018, FactSet informs us the estimated earnings growth rate for the S&P 500 is 18.2%.
The projections for strong earnings growth remain an important element in the bull case for stocks. The same can be said for the persistence of low interest rates, so it is helping at the moment to see long-term rates pull back and earnings growth accelerate.
It is also helping sentiment at the moment to hear Bloomberg.com report that sources suggest the Powell-led Fed could be alright with inflation overshooting the 2.0% target for a time. That is speculation of course, but the supportive connection this morning is that it suggests the Fed wouldn't be as aggressive in tightening monetary policy as some think.
And therein is another return to "normalcy" for this bull market, which is to say it is opening up again to the idea that the Fed will remain more friend than foe.
Everyone will have a better sense by the end of the week if that thinking is aligned with the Fed's view of matters. That's because Fed Chairman Powell will be appearing before the House Financial Services Committee on Tuesday and the Senate Banking Committee on Thursday to deliver the semiannual monetary policy report.
The Q&A portion of his testimony is what market participants are anxious to hear since it will be the first chance for Mr. Powell to share his policy insight as head of the Federal Reserve, which is the world's most influential central bank.
As an aside, St. Louis Fed President Bullard and Fed Governor Quarles will be speaking today; meanwhile, the January Personal Income and Spending report, which encompasses the Fed's preferred inflation gauge in the form of the PCE Price Index, will be released on Thursday ahead of Mr. Powell's testimony.
The lone economic release of note today is the New Home Sales report for January (Briefing.com consensus 645,000; prior 625,000). It will be released at 10:00 a.m. ET.
In the meantime, Warren Buffett has been entertaining listeners of CNBC this morning with his insight on the market and other matters. He has continued to assert that stocks are not necessarily overvalued, even though he acknowledged Berkshire Hathaway is finding it difficult to put its $116 billion of cash to work due to elevated valuations, and he added that stocks remain a better investment option than bonds.
Mr. Buffett's remarks can be deemed supportive as a whole for this morning's bullish bias, which took root overnight as Asian and European markets drafted off Wall Street's upbeat close on Friday.
In other news, press reports suggest the Trump Administration is entertaining imposing stiff tariffs on steel and aluminum and a bunch of Chinese products.
The threat of protectionism, however, is being seen this morning as a veiled threat more than anything else considering the futures market seems to be favoring positive news over negative news, which has been a normal bias for this bull market when it believes the Fed and interest rates won't get in its way.