The first move for the cash market when the opening bell rings is apt to be lower. That is the signal being thrown off anyway from the S&P futures, which are down three points and are trading 0.2% below fair value.
The S&P 500 eked out a gain on Friday, so it was ultimately successful in running its winning streak to seven sessions. Over those seven sessions, it has gained 2.5%.
The straightforward, unfiltered explanation, then, for this morning's negative disposition is that traders sense the market is due for a pullback of some kind.
The filtered version seen in the press, which typically needs to piece things together neatly with headline causality, covers the tidy excuses of worries about the investigation into Russia's interference with the 2016 election, troubles figuring out health care reform and tax reform, North Korea conducting another missile test, falling oil prices, and an uneasy perspective among European leaders on US positions at the G7 meeting.
It is all of the same noise that could be heard clanging in the background as the S&P 500 gained 2.5% over the last seven sessions. In other words, there are ample excuses to explain this morning's weak tone but no real good, headline-driven explanations.
The Personal Income and Spending Report for April has made some headline waves, however, not so much for what it showed but for what it didn't show. Specifically, it didn't show rising inflation on a 12-month basis.
Personal income and personal spending were both up 0.4% for the month, which was in-line with the Briefing.com consensus estimates. The PCE Price Index was up 0.2%, as was the core-PCE Price Index, which excludes food and energy (Briefing.com consensus +0.1%), and the personal savings rate as a percentage of disposable income held steady at 5.3%.
The key takeaway from the report is the year-over-year changes for the PCE Price Index (1.7% from 1.9% in March) and the core-PCE Price Index (1.5% from 1.6% in March) decelerated from the prior month. That is unlikely to alter the prevailing view that the Fed will raise the target range for the fed funds rate at its June meeting, although it will stir some belief that another rate hike this year may not happen.
There hasn't been much change in the Treasury market following the report, yet prices are holding up in its wake and yields are lower by one basis point across the curve.
Traders will be watching to see how the financials respond to the behavior of the Treasury market, as the financials will hold some influential sway over the behavior of the broader equity market.
The Case-Shiller Home Price Index for March and the Consumer Confidence Report for May will be released at 9:00 a.m. ET and 10:00 a.m. ET, respectively.
There will be news in those economic releases and perhaps some convenient excuses for explaining the stock market's disposition in their wake.