Market participants woke up on the right side of the bed evidently, as there is a cheery disposition in the futures market that is presaging a positive start for the stock market.
The S&P 500 futures are up seven points and are trading 0.3% above fair value. Separately, the Dow Jones Industrial Average futures are up 65 points and the Nasdaq 100 futures are up 27 points.
It's an interesting stance considering: (a) two Italian banks are being bailed out by Italian taxpayers for roughly €17 billion (b) San Francisco Fed President Williams (non-FOMC voter) and New York Fed President Dudley (FOMC voter) have made cases for why the fed funds rate could be raised again (c) passage of the Senate GOP's healthcare bill remains highly uncertain and (d) the Durable Goods Orders Report for May was disappointing.
But, hey, German business confidence hit a record high in June! That's not bad, but, hey, the German bund yield has dropped three basis points to 0.23% in the wake of that report.
That's a counterintuitive response which tends to go hand-in-hand with the 10-yr Treasury note yield continuing to drop despite the prevailing market narrative here that the economy is getting so much better. Apparently, not everyone is in agreement with that narrative.
The 10-yr note yield stands at 2.14% today versus 2.48% at the start of the year.
Low inflation has helped lead to low rates, whereas, low rates and low inflation have helped lead to higher stock prices. That intuitive interpretation has been part of the stock market's bullish fabric since 2009, so it stands out today as a support factor despite the headline disappointments elsewhere.
A continued rebound effort for oil prices ($43.18, +$0.17, +0.4%) is helping as well, yet this is predominately a contrarian trade at this point given the lack of fundamental drivers for it and the understanding that positioning/sentiment had gotten extremely negative amid last week's move into a bear market (i.e. a drop of 20% or more from a prior peak).
There isn't much in the way of corporate news to excite the masses today. Nestle (NSRGY) is in the spotlight after activist fund Third Point disclosed that it owns a roughly $3.5 billion stake in the company and has designs on encouraging management to speed up changes to bolster shareholder value.
The Durable Goods Orders Report for May isn't going to speed up second quarter GDP forecasts. It featured a weaker than expected 1.1% decline in durable orders (Briefing.com consensus -0.6%) and a 0.1% increase in orders excluding transportation (Briefing.com consensus +0.3%), as well as downward revisions to both metrics for April.
Nondefense capital goods orders excluding aircraft -- a proxy for business spending -- declined 0.2% while shipments of these same goods, which factor into the GDP computation, also declined 0.2%.
The key takeaway from the report is that it provides "hard" data that suggests economic activity in the U.S. is not as robust as many would like it to be (or would like to think it is).
But, hey, that's good for holding market rates down, so it has had little impact on the futures market.