There is no mystery as to what took place on Wall Street on Wednesday. It was a record-setting day, and whether one accepts that President Trump's speech was the main catalyst or not, the fact remains that the stock market continues to cling tightly to its bullish bias.
That bias has absolutely clobbered short sellers banking on a big pullback in the major indices. They will have their day at some point, but since November 8, 2016, their best opportunities have been in individual stocks and not at the index level.
There isn't a strong feeling this morning that the index trade is going to fall sharply in their favor today either. The S&P futures are down less than a point and are trading less than 0.1% below fair value.
That's a negative indication on the surface, but when pitted against Wednesday's move and the 12% increase in the S&P 500 since November 8, it's a long way from being negative in the true sense of the word.
It's natural for the market to catch its breath after a big up day, especially when that big up day follows a number of days when the market was already being criticized for being overextended on a short-term basis.
Also, with the Snap (SNAP) IPO today, we suspect there is a bit of hesitancy kicking in as participants wait to see how it opens, using the directional trade there perhaps as a cue to keep the broad market rally going or to take some money off the table.
The latest initial claims report should certainly help to underpin the growing belief in the prospect of the Federal Reserve raising the target range for the federal funds rate at its March 14-15 FOMC meeting. On a related note, Fed Governor Brainard was the latest official to suggest it might be appropriate to raise the fed funds funds rate soon.
Initial claims for the week ending February 25 decreased by 19,000 to 223,000 (Briefing.com consensus 244,000). That is the lowest level of weekly initial claims since March 31, 1973, and it lowered the four-week moving average by 6,250 to 234,250, which is the lowest level since April 14, 1973. Continuing claims for the week ending February 18 increased by 3,000 to 2.066 million.
The Big Picture column, which I will be publishing shortly, will discuss why the FOMC at its March meeting should pass through the window of rate-hike opportunity the stock market has opened up for it.
The European Central bank is another central bank whose monetary policy is getting called into question this morning. That's because eurozone CPI for February was up 2.0% year-over-year, which is above the ECB's target of below, but close to, 2.0%.
That was largely the result of higher energy prices as core CPI was up a tamer 0.9% year-over-year; nonetheless, the data-based evidence is building that the eurozone economy isn't in the same emergency state that triggered the ECB's ultra-accommodative monetary policy.
There will be a lot more written and said about central bank policy in the coming weeks and months, but for now, it is the stock market's seemingly indefatigable bullish bias that has everyone's attention.