The major stock indices all ended Monday's session lower, which made Monday a rare day. That uncharacteristic movement, however, has given way this morning to a characteristic effort of buying the dip.
The S&P futures are up four points, the Nasdaq 100 futures are up 15 points, and the Dow Jones Industrial Average futures are up 143 points.
This morning's effort, though, is more than a reflexive move. There are a number of reasons why the major indices are all indicated to open higher and they are congealing around a supportive theme: better-than-expected earnings news.
Dow component Caterpillar (CAT) has led the earnings brigade, blowing past consensus third quarter earnings estimates and raising its full-year guidance. Caterpillar noted it saw an improvement in end-user demand across all regions and most end markets.
It was exactly the type of perspective market participants had hoped to hear to corroborate their faith in the reflation trade.
Shares of CAT are up 7.3% in pre-market trading, which will offer a nice boost to the price-weighted Dow Jones Industrial Average. CAT won't be the only source of support either.
3M (MMM) also impressed with its results and outlook, registering sales increases in all segments and geographic regions in which it operates. MMM is up 2.7% in pre-market action.
United Technologies (UTX) is up 1.1% after it beat third quarter expectations and raised its full-year outlook. McDonald's (MCD) is flat after coming up a penny shy of earnings estimates, but exceeding quarterly same-store sales expectations.
And then there are non-Dow components like Biogen (BIIB), Eli Lilly (LLY), Sherwin-Williams (SHW), General Motors (GM), and Corning (GLW), which also surpassed earnings expectations.
Not all of those stocks are trading higher, though, as pre-report advances have given way to a sell-the-news response in some instances. Nevertheless, the point remains that encouraging earnings results are feeding the bull market and curtailing overall selling interest.
The good news for stocks is translating into bad news for longer-dated Treasuries.
The yield on the 10-yr note has climbed three basis points to 2.41% and is testing key resistance in the form of the closing-high yield of 2.42% seen in May. The two-year note yield is unchanged, so there is a curve-steepening trade unfolding that fits the reflation-oriented theme that is benefiting stocks at the moment.
That steepening is apt to be seen as a good move for the financial sector, which should help lead the stock market's opening advance.
There isn't any economic data of note for the U.S. today, although the U.S. economic prospects remain in focus as headlines surrounding possible tax reform initiatives and the impending nomination of the Fed chairman continue to swirl.
In all likelihood, the bears are continuing to swirl, too, as the stock market keeps defying correction calls.