We indicated yesterday that the stock market should trade higher (with should being the operative word) following a round of good earnings news from blue chip companies. Well, there is no coulda, woulda, shoulda regrets today. The stock market did trade higher in noticeable fashion, with the S&P 500 and Nasdaq Composite setting new record highs on a closing basis.
This morning, the trading tone is a little more subdued following a heavy slate of earnings results since yesterday's close. To no one's surprise, the results were mostly better than expected, yet there has been some limited follow through from buyers thus far.
The S&P futures are flat, the Nasdaq 100 futures are up four points, and the Dow Jones Industrial Average futures are up 27 points, which leaves them all trading just slightly above fair value.
It is easy to put a spin on why buyers appear to be a reluctant bunch:
- Texas Instruments (TXN) said demand for its products continued to slow across most markets and suggested the cyclical slowdown in the industry could have further to run than others have suggested.
- Boeing (BA) came up shy of first quarter EPS estimates and suspended its FY19 guidance, needing to get a better read on the financial impact of the 737 MAX groundings.
- Germany's Ifo Business Climate Index for April showed a continued deterioration in current sentiment and expectations.
- Australia's CPI report for the first quarter showed a deceleration in inflation, which is consistent with weakening economic activity.
The bigger takeaway, however, is that sellers are still the reluctant bunch.
The S&P 500 is up 3.5% this month, up 17.0% year-to-date, and up 24.8% since its December low, yet no one is running for the exit. Heck, shares of Boeing are indicated to open 1.5% higher.
There are headline elements for a positive spin, too:
- U.S.-China trade talks will resume next week, with Treasury Secretary Mnuchin and USTR Lighthizer traveling to Beijing.
- President Trump and Speaker Pelosi are reportedly set to meet next week to talk about an infrastructure spending plan.
- Occidental Petroleum (OXY) has made a rival $76.00 per share cash-and-stock offer to acquire Anadarko Petroleum (APC), which is a 20% premium over Chevron's (CVX) offer.
- The weakening inflation data in Australia opens the door for a rate cut by the Reserve Bank of Australia.
- Caterpillar (CAT), Snap (SNAP), Northrop Grumman (NOC), Norfolk Southern (NSC), Anthem (ANTM), and Stanley Black & Decker (SWK) all beat earnings estimates.
In brief, there is a lot of room for spin control ahead of today's open, because the futures market seems to be spinning its wheels.
There isn't a definitive line on how this market is likely to trade today, yet there is a definitive line that will be on everyone's radar screen. That line is 2940.91, which is the all-time intraday high for the S&P 500.
That is presumably the next point of conquest for this bull market and a gateway to further gains with a fear of missing out leading to higher highs. Then again, the bears might spin it as the culmination of a huge rally that becomes a double top for the market and invites a pickup in selling interest.
All that is known for sure at this juncture is that the bulls have been in control of the spin control, with the Fed's pivot and hopeful-sounding trade negotiations with China driving the round-trip price action to prior highs.