The bull market took a little nap on Monday, but today, it is awake and looking refreshed. The S&P futures are up nine points and are trading 0.3% above fair value. The Nasdaq 100 futures are up 29 points and the Dow Jones Industrial Average futures are up 156 points, leaving them 0.3% and 0.6% above fair value, respectively.
This bullish bias got planted overnight with a big run in the Shanghai Composite (+2.4%), which was helped by some reassuring home price data and news of a liquidity injection from the People's Bank of China, and it has blossomed this morning following better-than-expected economic sentiment data out of Germany and earnings results from Johnson & Johnson (JNJ), UnitedHealth (UNH), and Bank of America (BAC).
JNJ is indicated 1.7% higher and UNH is indicated 3.0% higher. Those moves will underpin the outperformance of the Dow Jones Industrial Average.
Shares of BAC, on the other hand, are indicated 0.6% lower. Bank of America beat on earnings, but came up short of revenue estimates. It would be remiss not to add that its consumer lending business was quite strong and helped offset a lackluster showing from its global markets segment.
It's reassuring to see Bank of America's consumer banking business hanging in so well, as it's a development that contradicts concerns about the U.S. possibly being headed for a recession soon.
BlackRock (BLK), which is the largest asset manager, also reported better-than-expected earnings, yet its stock is also indicated slightly lower.
Nevertheless, BlackRock is still factoring into the bullish mix thanks to CEO Larry Fink's belief that there is a "...risk of a melt up [in stocks], not a meltdown here" because of the record amounts of cash on the sidelines and the underinvestment in stocks.
The melt-up risk, Fink said, has to do in part with central banks being "more dovish than ever."
Right on cue, the minutes from the latest Reserve Bank of Australia meeting floated the possibility of a rate cut, Boston Fed President Rosengren (FOMC voter) floated the idea of establishing an average inflation target, and Reuters reported that a "significant minority" of ECB policymakers expressed doubt about the likelihood of a rebound in economic activity during the second half of the year.
Yes, central bankers are certainly leaning dovish these days. We wouldn't say "more than ever," because quantitative easing isn't what it used to be, and the Federal Reserve for one isn't sitting at the zero bound with its policy rate. Still, the point being made is that central bankers are encouraging the running of the bulls with current policy positions.
As a reminder, the Industrial Production report for March (Briefing.com consensus +0.2%; prior +0.1%) will be released at 9:15 a.m. ET and will be followed by the NAHB Housing Market Index for April (Briefing.com consensus 63; prior 62) at 10:00 a.m. ET. The bigwigs reporting earnings after the close include CSX Corp. (CSX), IBM (IBM), Netflix (NFLX), and United Continental (UAL).