If you want to maintain some sanity, we would suggest looking away from the futures market. It is quite volatile these days as traders try to extrapolate from the headlines whether the bottom of this October correction is in or has more room to go.
A few hours ago, it was clear for everyone to see that the selling had not run its course. The S&P 500 futures were down 27 points and trading 0.8% below fair value. It was a buzz-kill indication for many given how the broad market had rallied back from yesterday's lows.
A disappointing outlook from semiconductor company Texas Instruments (TXN), which said it has seen demand for products slow across most markets, got a lot of the blame for the deflated indication.
Not surprisingly, all of the other familiar explanations -- interest rate concerns, President Trump criticizing Fed Chairman Powell, Italy and its budget fight, Saudi Arabia, the U.S.-China trade fight, etc. -- were attached to the downside bias like barnacles on a ship.
Things started to turn, however, around 5:00 a.m. ET. That's important to note because there wasn't a news catalyst for the turn at that time. It is also important to note, because there was a great deal of improvement in the futures trade before Dow component Boeing (BA) reported its results, and yet, one will hear Boeing get a lot of attribution for turning around the futures market.
Boeing reported at 7:30 a.m. ET. Its results were quite good. The company easily eclipsed consensus revenue and earnings per share estimates for the third quarter and raised its FY18 EPS outlook above the current consensus estimate.
In the immediate wake of its report, the S&P futures moved up from 2730 to 2745. They have faded back a bit since then and are currently down four points at 2742, which leaves them roughly in-line with fair value.
Flattish is certainly better than what was indicated several hours ago, but flattish after a 6.0% decline in the S&P 500 this month is far from a rip-roaring indication that will placate many anxious investors.
Boeing investors, though, should be placated by the understanding that their stock is up nearly 15 points, or 4.3%, in pre-market action. That move will account for about 105 Dow points at the open if that indication holds.
It has been a nice palliative to relieve the pain of the disappointment from Texas Instruments and the 4.2% downturn in UPS (UPS), which came up shy of third quarter revenue estimates. AT&T (T) is another laggard of note, down 3.2% after the company came up shy of third quarter earnings estimates.
There is a lot of earnings news today that includes some impressive results from Northrop Grumman (NOC). We can't cover it all here, yet the gist of trading matters is that it has created some mixed feelings about where this market is destined to go in the near term.
The results aren't bad, yet the guidance overall hasn't been convincing enough to eradicate the peak-growth concerns that have undercut the major indices.
That doesn't mean necessarily that we are destined for another sharp downturn today, but it does leave open the possibility for selling into short-covering strength.