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HOME > Our View >Page One >Falling Back on a Fallback...
Page One Archive
Last Update: 24-Sep-18 08:59 ET
Falling Back on a Fallback Excuse

The futures market is presaging a lower start for the major indices and the excuse for why that's the case is as hackneyed as saying the market is bothered by trade issues.  Oh wait, that is the excuse being touted for why the futures market is weak this morning.

Yes, trade issues have got the market down -- or so one is expected to believe. 

Tariffs on $200 billion of Chinese imports go into effect today; the Trump Administration is reportedly likely to pursue tariffs on an additional $267 billion of Chinese imports; China has countered with tariffs on an additional $60 billion of U.S. imports; and China has also canceled the proposed trade talks between senior officials.

Does any of that sound familiar?  It should.

Those threats were all unfurled last week while the S&P 500 and Dow Jones Industrial Average were - egad! - setting new record highs.

This market isn't overly bothered by trade issues, because the trade issues have yet to show up in the economic data and the earnings guidance in a sweeping and convincing way.  Accordingly, they have been swept under the rug to this point by the market, which expects them to be resolved and/or to have only a minor economic impact.

The trade issues are an excuse being used to put a spin on why the S&P futures are down five points and trading 0.2% below fair value.

The Dow Jones Industrial Average futures are down 28 points, which leaves them trading less than 0.1% below fair value.  The Nasdaq 100 futures are the real weak spot, speaking in relative terms.

They are down 35 points and are trading 0.6% below fair value.  The relative weakness can be traced to a Bloomberg report highlighting the idea that the White House is considering an executive order (note, nothing has been implemented) for antitrust officials to probe the business practices of social media companies.

Worries about a potential increase in regulation of those companies, then, is the basis for the early underperformance.

The weakness in mega-cap companies like Alphabet (GOOG) and Facebook (FB) is arguably more of a drag on the broader market this morning than the trade issues.

In any event, buyers are holding back for the time being even though there has been a spate of M&A activity to lend some support.

Comcast (CMCSA) has reportedly won the bidding for Sky (SKYAY) with a hefty $40 billion offer that has analysts and investors concerned the company overpaid.  Shares of CMCSA are down 3.4% in pre-market trading.

Separately, Barrick Gold (ABX) and Randgold (GOLD) are tying up in a $6 billion stock-for-stock transaction while SiriusXM (SIRI) has made a bid to acquire Pandora Media (P) for approximately $3.5 billion, or $10.14 per share, in stock.

Beyond the corporate developments, market participants are also focused on this week's FOMC meeting, which is widely expected to produce another rate hike, and the decision over the weekend by OPEC and non-OPEC producers not to increase oil output.

Oil prices are up $1.05, or 1.5%, to $71.83 per barrel in a relief rally.  That pop in oil prices should give a lift to the energy sector.

Any such lift at this point, however, isn't expected to be enough to boost the broader market, which is poised for a modestly lower start because of trade concerns... oh, stop it.

--Patrick J. O'Hare, Briefing.com

The futures market is presaging a lower start for the major indices and the excuse for why that's the case is as hackneyed as saying the market is
 
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