Might today be a day of rest for the bulls? The answer will be known in approximately seven hours, but what is known now is that the bulls will be hitting the snooze button when the market opens.
Currently, the S&P futures are down 16 points, which leaves them 0.5% below fair value. The Nasdaq 100 futures are down 65 points and the Dow Jones Industrial Average futures are down 163 points.
There are several headline factors contributing to the negative disposition:
- The 10-yr note yield is above 3.00% again (currently 3.04%)
- Rising oil prices ($71.65, +$0.69, +1.0%), and worries about a pickup in inflation expectations, are reportedly behind the uptick
- Home Depot (HD) is down 2.9% despite reporting better than expected first quarter earnings and reaffirming its full-year outlook. The focal point has been weaker than expected same-store sales in the first quarter.
- China reported a batch of mixed data for April (industrial production, fixed asset investment, and retail sales) that has sparked concerns about fading cyclical growth momentum
- There was a reminder from the U.S. ambassador to China that the two sides remain very far apart on trade matters; and
- This morning's economic data out of the U.S. -- Retail Sales and Empire Manufacturing -- didn't pacify market participants
Briefly, retail sales increased 0.3% in April, as expected, on top of an upwardly revised 0.8% increase (from 0.6%) in March. Excluding autos, retail sales rose 0.3% (Briefing.com consensus +0.5%) on top of an upwardly revised 0.4% increase (from 0.2%) in March.
While there was a headline miss for the ex-auto number, that disappointment should be mitigated by the upward revision for March.
The key takeaway from the report is that consumer spending on goods was decent in April. Core retail sales, which exclude auto, gas station, building materials, and food and drinking services sales, jumped 0.4%.
The Empire Manufacturing Survey for May, meanwhile, showed a pickup in the general business conditions index to 20.1 (Briefing.com consensus 15.0) from 15.8.
The key takeaway from the report, however -- and a cause of concern that fits into the inflation narrative -- is that the prices paid index rose to its highest level (54.0) in several years.
The 10-yr yield briefly hit 3.05% in the wake of the report before running into some resistance.
In any event, the "inflation concern" narrative has been stoked again this morning along with the concern about rising interest rates. Those are the two main elements behind the weakness in the futures market and they are why the bulls are in a rest mode for now.