The oil market is fired up this morning, yet that's about all that is fired up. The S&P futures for their part are up three points, which leaves them just 0.1% above fair value.
The cash market may start the session higher, then, but like many sessions before this one, it isn't showing signs of having a full head of steam when the opening bell rings.
Its torpid demeanor is more disappointing for traders than investors, yet it is enigmatic for both contingencies given the narrative that favors accelerating economic growth and accelerating earnings growth.
That's the narrative, yet a key story line pertains to the misgivings about the cloudy political atmosphere in Washington and how it holds the potential to disappoint those growth expectations.
The stock market, therefore, appears stuck between a rock and a hard place, with the rock being valuation concerns and the hard place being Washington (literally and figuratively).
Oil prices, on the other hand, are unstuck this morning. They are currently up 3.5% to $49.53 per barrel on the back of the news that Saudi Arabia and Russia are backing an extension of the oil production cut agreement between OPEC and certain non-OPEC members until March 2018.
The formal meeting on the production issue won't take place until May 25, but with those lead nations out in front of that meeting with their concession, it is being seen today as a pretty good bet that the extension, which is longer than the six months many participants were expecting, will happen.
There is some chatter already, however, that the spike in oil prices won't last as higher prices will simply induce more production from U.S. producers, just as the prior production cut agreement and ensuing price spike did.
Nevertheless, oil prices are moving up sharply most likely due to some offside positioning that has short sellers looking to cover positions that were tied to assumptions that oil prices would be moving lower in the very near term.
On a separate note, the New York Fed's Empire Manufacturing Survey for May moved lower, checking in at -1.0 (Briefing.com consensus +7.5) versus 5.2 for April. That downturn was driven by a drop in every component index. The New Orders Index (from 7.0 to -4.4), the Unfilled Orders Index (from 12.4 to -3.7), and the Prices Paid Index (from 32.8 to 20.9) paced the pullback.
The key takeaway from this report is that manufacturing activity in the New York Fed region slowed in May, which will create a dent in some of the lofty second quarter growth expectations.
In the same vein, China reported some relatively weak economic data over the weekend that played into concerns about a slowing growth rate there due to increased regulatory constraints.
Specifically, industrial production for April increased 6.5% year-over-year, versus 7.6% in March; fixed asset investment increased 8.9% year-over-year, versus 9.2% in March; and retail sales rose 10.7%, versus 10.9% in March.
Those reports haven't caused too much of a stir for the commodities markets, many of which had been hit with selling interest ahead of those reports.
Retail stocks know a thing or two about being hit of late with selling interest. That's important to note because this week's earnings calendar will be dominated with retail companies reporting their results, including Home Depot (HD), Walmart (WMT), Target (TGT), and Gap (GPS). Market participants will be watching anxiously to see how the retail stocks respond in the wake of actual results.
For now, the broader market is responding with a bit of an uplift that is flowing predominately from the energy trade, which is a bit ironic because the broader market, with a few exceptions, hasn't shown any real energy since the beginning of March.