Out with the new and in with the old... sort of. That's the initial impression one gets anyway when assessing the response to the large batch of earnings results since yesterday's close.
Alphabet (GOOG) headlined things last night. The company beat consensus estimates handily, but its operating margin reportedly didn't live up to expectations. Shares of GOOG are down 0.4% in pre-market trading.
The lackluster response to the earnings report from a heavyweight like Alphabet might have been the stuff that would drive the futures lower on any other day, but this day, there are a plethora of old-line companies that have rallied the troops with their earnings news.
Caterpillar (CAT), United Technologies (UTX), Verizon (VZ), Lockheed Martin (LMT), Eli Lilly (LLY), Harley-Davidson (HOG), and Coca-Cola (KO) are all trading higher after posting their earnings results for the March quarter.
Arguably, Caterpillar, which is up 3.4% in pre-market trading, provided the most uplifting report for the broader market. The industrial giant not only beat quarterly consensus revenue and earnings estimates by a wide margin due to improved end-user demand across all regions and most end markets, it also raised its FY18 guidance, citing growing demand for products and services.
That's an encouraging proclamation with respect to the global economic outlook that has been bothering market participants given some weaker than expected economic data of late and the flattening yield curve.
We'll have to see if that outlook can carry the day for market bulls. It is certainly helping to carry the futures market before the open.
The S&P futures are up 13 points and are trading 0.6% above fair value. The Dow Jones Industrial Average futures are up 121 points and the Nasdaq 100 futures are up 25 points.
Something else that is up, however, is the yield on the 10-yr note. It has climbed two basis points to 2.99% and continues to flirt with the psychologically important 3.00% level.
Rising rates are a natural offshoot of stronger economic activity. The menacing consideration for market participants, however, is the specter of them moving up rapidly on concern the Federal Reserve will need to be more aggressive with its rate hikes.
Separately, there is some concern that the higher risk-free rates will create competition for capital that has previously flowed into stocks in a low-rate world. To that end, the 2.24% yield on the 1-yr Treasury note is above the current 2.04% dividend yield for the S&P 500.
This interest rate dynamic, and the stock market's (dis)comfort with it, is going to be a key driver of the stock market as the year progresses.
In the meantime, today's progression will feature several economic releases, including the New Home Sales Report for March (Briefing.com consensus 631,000; Prior 618,000) at 10:00 a.m. ET, and a $32 billion 2-yr note auction at 1:00 p.m. ET.
The bias right now in the stock market is favorable one thanks to a cohort of blue-chip earnings reporters. How today starts, though, won't be as meaningful as how it ends.
There is a basis for today to be a good day, yet the end result is apt to boil down to how the stock market handles its perturbation over interest rate moves.