What you see isn't always what you get. Yesterday was a case in point.
The major indices were cruising during the first half of the day. The Dow, Nasdaq, and S&P 500 were up as much as 1.5%, 0.9%, and 1.1%, respectively. During the second half of the day, however, they broke down. When the closing bell rang, the Dow was up 0.7%, the Nasdaq was down 0.1%, and the S&P 500 was up 0.1%.
By and large, it was a technically-based move. The S&P 500 ran up to its 50-day simple moving average (2729), peaked its nose above that mark, and then promptly saw its whiskers get cut off by renewed selling interest.
Interest rates weren't the spoiler yesterday. They actually moved down a bit.
The spoiler was the failure at the 50-day simple moving average, which had been preordained perhaps by the underperformance of the financial and technology sectors during the early rally effort.
So, we look to the futures market this morning and see it pointing skyward, implying a nice opening setup for the bulls. The S&P 500 futures are up eight points and are trading 0.6% above fair value. The Nasdaq 100 futures are up 36 points and the Dow Jones Industrial Average futures are up 92 points, which leaves them about 0.7% to 0.9% above fair value.
Based on yesterday's action, though, and the action this week, where it has been difficult to sustain a gain, one has a basis to wonder if it's a setup for the bulls or if the bulls are simply being set up for another disappointment.
The positive bias doesn't have a specific news driver behind it. We would hasten to point out, however, that interest rates are moving back down.
The yield on the 10-yr note is down three basis points to 2.89%. In other words, it has retraced the entirety of the spike to 2.95% following the release of the FOMC Minutes on Wednesday.
This is an interesting move in that it precedes scheduled remarks today from several FOMC voters: New York Fed President Dudley (10:15 ET), Cleveland Fed President Mester (1:30 p.m. ET), and San Francisco Fed President Williams (3:40 p.m. ET). Boston Fed President Rosengren, who is an alternate FOMC member, will be joining a panel with New York Fed President Dudley at 10:15 ET.
It's understood by now that these Fed officials are on board with continuing to pursue a gradual pace of rate increases, so the buying interest in front of their remarks implies the market has already accounted for that stance and isn't expecting any "new" hawkish surprises from them.
In other developments, Hewlett-Packard Enterprise (HPE) and HP, Inc. (HPQ) both surprised investors with better than expected earnings results. Their stocks are up 13% and 6%, respectively, in pre-market action.
Shares of General Mills (GIS), on the other hand, are down 4% after the company announced its intention to acquire pet-food maker Blue Buffalo Pet Products (BUFF) for $8 billion, or $40.00 per share, in cash.
There isn't any economic data of note out of the U.S today. The stock market, therefore, will have one less distraction as it tries to avoid its third loss in the last four weeks. The S&P 500 needs to reach 2732.22 to do that, which is a whisker above its 50-day simple moving average.