Coming off the Fourth of July holiday, there appears to be a little sparkle in the stock market this morning despite the dark report that North Korea lit up the sky with a test of an intercontinental ballistic missile. That test has triggered an emergency session today for the UN Security Council, yet it hasn't triggered any material selling interest here or abroad.
Foreign markets have taken the news in stride, with major indices in Asia and Europe logging modest gains. The S&P 500 futures and the Nasdaq 100 futures are both trading slightly above fair value, which suggests the cash market will edge higher when the opening bell rings.
It is expected to be a somewhat thinly-traded session today as many participants likely have plans to ride out this week as a vacation week.
Still, there will be plenty of interested observers watching the face of things since the stock market has had a Janus-like orientation, with the richly valued technology stocks looking backward and the undervalued financial and energy stocks looking forward.
The disparate performances have been heralded as a sign of a "reflation trade" at work, with value-based stocks coming back into favor as global growth expectations improve. The breakout to new all-time highs on Monday by both the Dow Jones Industrial Average and the Dow Jones Transportation Average was seen as an encouraging confirmation of the reflation trade.
One could add the rebound in oil prices to that reflation trade mix. They have risen for eight consecutive sessions after entering bear market territory.
Some think that could be a head fake based on the understanding that positioning had gotten extremely negative, meaning the latest rebound try could be little more than a contrarian trade that is squeezing short positions. We shall see.
Oil prices are down 1.2% this morning to $46.50 per barrel amid reports that Russia isn't on board with further supply cuts and the added news that OPEC exports increased 450,000 barrels per day month-over-month in June.
The downturn in oil prices could take a little steam out of the S&P 500 energy sector, which jumped 2.0% in Monday's abbreviated session. Market participants, though, will be more interested to see the disposition of the financial and technology sectors and how that plays out for the broader market.
The tech sector was weak once again on Monday and led a 0.5% decline for the Nasdaq Composite, whereas solid gains for the financial and energy sectors underpinned a 0.2% gain for the S&P 500.
Monetary policy considerations could hold some sway over today's trading. The minutes from the June 13-14 FOMC meeting will be released at 2:00 p.m. ET and will be studied carefully for any remarks on the likely rate-hike path, balance sheet normalization efforts, and asset prices.
Before then, the Factory Orders Report for May (Briefing.com consensus -0.5%; prior -0.2%) will come and go as the lone release on today's economic calendar. It should prompt a collective yawn since it's a May report and isn't known for having market-moving status like the Employment Situation Report, which will be released Friday.
Not surprisingly, corporate news is on the light side this morning, but one should expect some heavy trading in the auto parts retailing space after O'Reilly Automotive (ORLY) said its second quarter comparable sales rose 1.7% versus prior guidance of 3% to 5% due in part to "overall weak consumer demand." Shares of ORLY are down 8% in pre-market action.