President Trump fired FBI Director James Comey. This is a major news item being discussed by the news media. It has some sensational undertones, which have the political cognoscenti all fired up this morning. What about the stock market, you ask? Well, it continues to smolder.
The S&P futures are down two points and are trading 0.1% below fair value. Apparently, stock market participants aren't as fired up by the Comey news as the media seems anxious to inflame market sentiment on the matter.
In a game of connect-the-dots, it is thought Comey's surprise firing, and the political rancor it has created on Capitol Hill, will forestall tax reform efforts. In that regard, it is being discussed as a distinct negative for the stock market. Still, what is being discussed and what is actually manifesting itself in the market are two different things.
It is definitely a distraction, yet it is most definitely not being thought of at this juncture as a tax reform deal killer. Those embers continue to burn. Had they been extinguished by the news of Comey's firing, the futures would be down more than they are -- a lot more.
To put matters further into perspective, one should ask themselves when they last made an investment decision -- either to buy or sell a stock -- based on who the FBI Director was. Without verification, we'll still stay say with certainty that Warren Buffett never did.
Anyhow, Comey's firing is going to stir K Street today a lot more than it will Wall Street. Frankly, Wall Street hasn't been stirred by much of anything lately.
The latter statement might seem entirely out of line considering the Nasdaq and the S&P 500 hit new record highs this week, yet they have done so in the most anemic way possible.
Why that is remains an open source of debate. Valuation concerns are at the top of many rebuttal lists. Our sense of things is that, in the big picture, it boils down to a less enticing risk-reward assessment. Accordingly, I will be expounding on that viewpoint in The Big Picture column this week.
Today's exposition, though, is linked to current news events that have curtailed investor conviction.
The news of Comey's firing is only a small portion of things, which also include a disappointing response to Walt Disney's (DIS) latest earnings results, some mixed inflation data out of China, which was highlighted by a higher than expected print for April CPI (+1.2% yr/yr versus 1.1% expected) and a weaker than expected print for April PPI (+6.4% yr/yr versus 6.7% expected), and some lingering geopolitical angst after North Korea's ambassador to the UK said on Tuesday that North Korea will continue with its nuclear tests when it deems appropriate.
A bump in oil prices ($46.43, +$0.55, +1.2%) following the API inventory report last night, which showed a large drop in oil inventories but a large build in gasoline stockpiles, is providing a measure of support along with the favorable response to NVIDIA's (NVDA) latest earnings report and outlook.
The Import/Export Price Index for April didn't alter the market's mood in a meaningful fashion, probably because traders are are more interested in the CPI report for April that will be released on Friday and probably because they recognize it doesn't change the existing assumptions about the Fed's monetary policy path.
The latter points aside, the Import/Export Price Index revealed an uptick in prices for both imports (+0.5%) and exports (+0.2%) in April that left the year-over-year growth rates at 4.1% and 3.0%, respectively.
Excluding fuel, import prices were up 0.3% for April and up a more palatable 1.1% year-over-year. Export prices, excluding agriculture, rose 0.1% in April and are up 2.9% year-over-year.