The stock market enjoyed a solid outing on Monday and it stands ready to reinforce its bullish-minded position at the start of today's trading. The S&P futures are up 16 points and are 0.7% above fair value. The Nasdaq 100 futures are up 45 points and the Dow Jones Industrial Average futures are up 208 points, placing them 1.1% and 1.0%, respectively, above fair value.
The opening pop is going to push the S&P 500 above its 50-day simple moving average (2685), which provided resistance during Monday's rally effort.
There isn't a lot of mystery behind this morning's bullish bias. Good earnings news has been the catalyst for keeping Monday's rally going.
Netflix (NFLX), Goldman Sachs (GS), UnitedHealth (UNH), and Johnson & Johnson (JNJ) all topped consensus earnings expectations for the March quarter and issued reassuring guidance.
Those four stocks are all trading higher in pre-market action, but none more so than NFLX, which is up 7.3%. That outsized response is helping repair some of the damage that has been done of late to the market's key growth stocks whose collective weight can make an influential difference in driving the broader market.
At the same time, though, the positive response to the earnings news in general is lifting the shadow of concern that was cast over the market last Friday when the major indices rolled over despite some better than expected earnings news from the nation's biggest banks.
It is succeeding in that respect because the market is acting like it was expected to act. That is, the market is focusing its energy on the most important fundamental element driving stock prices and it is getting less caught up in noisy headlines pertaining to trade, geopolitics, and the political drama in the U.S.
On a related note, there was a Wall Street Journal report late yesterday that suggested the U.S. is looking into imposing a third tranche of trade restrictions, with an emphasis on Chinese technology firms. A few weeks ago, that type of headline would have forced a downdraft in the futures market, but that hasn't happened today.
Instead, the futures market has been lifted by good earnings news and a burgeoning sense that a rally can be forged in the short term at least in the face of more palatable valuations and contrarian trading signals like rising cash levels among portfolio managers and increasing pessimism among retail investors.
Headline volatility will remain a risk, yet the response factor to a bothersome headline will likely hinge on the key earnings news of the day. If it is relatively disappointing, the broader market will be apt to have a more negative response to the macro headlines. If the key earnings news is predominately good (like it is today), there will be less of a knee-jerk response to the macro headlines.
Some of today's macro headlines include a mixed batch of economic data out of China, which was highlighted by the report that Q1 GDP increased 6.8% year-over-year. That was in-line with expectations, but industrial production and fixed asset investment for March came up short of estimates while retail sales exceeded expectations.
A short time ago, it was announced that the People's Bank of China will be cutting the reserve requirement ratio for most commercial banks in China by 100 basis points, effective April 25.
It was also learned a short time ago that housing starts and building permits in the U.S. in March exceeded economists' average expectations.
Starts increased 1.9% month-over-month to a seasonally adjusted annual rate of 1.319 million units (Briefing.com consensus 1.268 million) while permits rose 2.5% to a seasonally adjusted annual rate of 1.354 million (1.315 million). There were upward revisions to starts and permits for February as well.
The headlines, though, don't tell the complete story. The key takeaway from the report is that the monthly increases were driven entirely by multi-unit dwellings. Single-family starts were down 3.7% while single-family permits fell 5.5%, which is disappointing given the supply shortage of single-family homes.
The Industrial Production and Capacity Utilization Report for March will be released at 9:15 a.m. ET.
There are several Fed speakers today, two of whom -- San Francisco Fed President Williams and Fed Governor Quarles -- are FOMC voters. They are speaking at 9:15 a.m. ET and 10:00 a.m. ET, respectively.
The changing perspective on monetary policy has been the primary source of volatility this year, so keep an eye on their remarks to see if they upset what is going to be a bullish-minded start for the stock market today.