The S&P 500 declined 2.56 points, or 0.1%, on Wednesday. Naturally, the S&P futures are up three points and are trading 0.1% above fair value as that pullback has the buy-the-dip crowd ready for action.
We are being a bit sarcastic in our view of things, yet the overarching point remains that the stock market continues to be resilient to selling efforts.
The S&P 500 is up 3.7% in February despite a lot of hemming and hawing about political uncertainty here and abroad. Today, political matters are being pointed to as a source of support on account of two headline drivers:
- News from yesterday that Francois Bayrou, a centrist French presidential candidate, will not run and instead will support the candidacy of Emmanuel Macron -- a move that some think lessens the chances of Marine Le Pen, a candidate who would like France to leave the EU, winning the presidency; and
- Treasury Secretary Mnuchin hitting the business channels today to highlight efforts at putting together a tax reform plan that, ideally, he would like to see pass before the August recess (although he did concede it was possible passage could slip later into the year)
In his remarks, Mr. Mnuchin has touched on the same ideas/concerns that have been floated for market participants, so there isn't anything entirely "new" in what he is saying, yet throwing out the possibility of passing tax reform before the August recess is a new consideration that will feed the tax reform hope this market has been feeding on since the election.
From that standpoint, the old thought of tax reform continues to have staying power as a source of support that is keeping selling efforts in check.
Another source of support has been the jump in oil prices (+1.8% to $54.57), which has followed on the heels of the American Petroleum Institute reporting a weekly drawdown in both crude and gasoline stockpiles. The Department of Energy will release its weekly inventory report at 11:00 a.m. ET today, following on the heels of the natural gas inventory report at 10:30 a.m. ET.
The Department of Labor released its weekly initial claims report a short time ago. It was another encouraging report as it fell in-line with the previous 102 weekly reports showing initial claims below 300,000.
Specifically, initial claims for the week ending February 18 increased 6,000 to 244,000 (Briefing.com consensus 242,000). That lowered the four-week moving average by 4,000 to 241,000, which is the lowest average since July 21, 1973. Continuing claims for the week ending February 11 fell by 17,000 to 2.060 million.
The key takeaway from this report is that it covers the period in which the survey for the February Employment Situation report was conducted, and given the low level of claims, it will likely feed a belief that nonfarm payrolls are apt to increase by 200,000+ again.
Another month of strong nonfarm payrolls growth that is joined by a notable pickup in average hourly earnings growth could give the Fed the rationale it needs to raise the fed funds rate at its March meeting.
The market, though, still doesn't think the Fed will raise rates in March and it probably won't given any stronger consideration to the idea until it sees the whites of the eyes of a strong February employment report.
Dallas Fed President Kaplan (an FOMC voter) will be speaking at 1:00 p.m ET today.
In other developments, Brazil lowered the Selic rate by 75 basis points to 12.25%, the Bank of Korea kept its key policy rate unchanged at 1.25%, and Bundesbank President Weidmann reiterated his support for the ECB to be less accommodative.
There has been a plethora of earnings reports since yesterday's close with Tesla (TSLA), HP (HPQ), and Kohl's (KSS) among the headliners. For the full rundown of results, be sure to visit Briefing.com's Earnings Results page.