There is a negative bias in pre-market action and it stems from the political dealings in the eurozone. The S&P futures are down 14 points and are trading 0.6% below fair value. The Dow Jones Industrial Average futures are down 152 points and the Nasdaq 100 futures are down 22 points.
The gist of things is that Italy's president vetoed the selection of a euro-skeptic economic minister made by a populist coalition aiming to come to power. That veto upended efforts to form a ruling coalition and reportedly placed Italy on track for a snap election that insiders fear could become a referendum on Italy's membership in the European Union.
Separately, Spain's Prime Minister Rajoy's leadership is going to be put to the test with a confidence vote on Friday in the wake of a corruption scandal involving 29 individuals with ties to his People's Party.
These developments have fueled risk-off trading behavior in Europe that has carried over to global markets, which have also had to contend with the ongoing uncertainty surrounding trade matters, diplomatic dealings with North Korea, and brewing challenges for emerging markets due to the strengthening dollar.
Eurozone matters, though, are the main driver at the moment. Not surprisingly, the German 10-yr bund has continued to power higher in a flight-to-safety trade that has pushed its yield down three basis points to 0.32% (from 0.62% a little over a week ago).
Yields for the 10-yr Italian BTP and the 10-yr Spanish ODE have climbed 39 basis points and seven basis points, respectively, to 3.08% and 1.60%.
The latest travails for the eurozone are not entirely new. It is not unlike Mt. Kilauea, which has been active for a long time, but is now erupting again and catching everyone's attention.
There has always been an active stream of concerns about the survival of the European Union and the euro.
From time to time, those concerns erupt and leave everyone wondering if the end is near. This is one of those times, but like the tourists and residents of Hawaii taking photos next to a lava flow, things are still at a stage where there is more wonderment than true fear in the concept of the European Union cratering.
In any event, what's going on in Europe could technically be spun as a positive for the U.S. market. We certainly have some of our own political hangups, yet the U.S. abides by a regular and peaceful transfer of power, has an economy that is running relatively well right now, and a stock market that is exhibiting relative strength versus many other developed markets.
Market participants will get some added sense later this week of how the economy is doing when the Personal Income and Spending, ISM Index, and Employment Situation Reports are released. Today's data lineup includes the S&P Case-Shiller Home Price Index for March (Actual 6.8%; Briefing.com consensus 6.4%) and the Consumer Confidence Index for May (Briefing.com consensus 127.5).
The 10-yr Treasury note has rallied in front of today's reports, bolstered by the risk-off lava flow from the eurozone. The yield on the 10-yr note, which was pushing 3.10% a little over a week ago, has dropped five basis points this morning to 2.88%.