The futures market is in a funk this morning. Currently, the S&P futures are down eight points and are trading 0.3% below fair value. The negative tone stems from a lingering, and frustrating, sense of uncertainty about several items, namely policy issues and the fading vitality of the pro-growth trade.
There are news reports this morning suggesting the White House has been working to revive the health care reform bill. That's a point of consternation for a few reasons: (1) it raises concerns about a delay in the tax reform process and (2) it drudges up a belief that the policy agenda is like a ship without a rudder at the moment, drifting with the wind but ultimately not having a definitive direction.
In other words, market participants are a little tired of not knowing what they are going to get each day and their frustration over the lack of policy progress is starting to intensify.
Moreover, their attention to the disconnect between "hard" data, like the disappointing March auto sales figures, and the "soft" data, like the relatively upbeat ISM Manufacturing Index for March, is picking up as the reality of the "hard" data is making it difficult to justify some of the lofty stock valuations.
Throw in the geopolitical angst related to North Korea, and the uncertainty surrounding the upcoming French presidential election (there is another debate tonight), and, well, there is reason for conviction on the buy side to be lacking at the moment.
An added headline factor weighing on the futures market this morning is a Citigroup downgrade of Bank of America (BAC) to Neutral from Buy, which is serving as a stark reminder that the bank stocks have lost their post-election mojo with the flattening of the yield curve.
To be fair, Goldman Sachs added Caterpillar (CAT) to its Conviction Buy List, which is a vote of confidence seemingly in the pro-growth industrial trade, yet that trade has been culled of late with the policy inertia and the slow-growth message embedded in much of the "hard" data.
The February Trade Balance Report spoke to that slow-growth message, too.
From a headline perspective, the report was a good one as the trade deficit narrowed to $43.6 billion (Briefing.com consensus -$44.7 billion) from an upwardly revised $48.2 billion (from -$48.5 billion) in January, as exports were $0.4 billion more than January exports while imports were $4.3 billion less than January imports.
The narrowing deficit should help some with first quarter GDP forecasts, yet the key takeaway from this report is that imports were down as much as they were in February, which speaks to some softening demand from U.S. consumers.
Notably, imports of consumer goods decreased $3.1 billion, led by a $1.9 billion drop in imports of cell phones and other household goods. Meanwhile, imports of automotive vehicles, parts, and engines decreased $2.6 billion. Those decreases were offset somewhat by a $1.4 billion increase in imports of industrial supplies, almost all of which stemmed from a $1.3 billion increase in crude oil imports.
The trade deficit with China, incidentally, was $31.7 billion in March, which is something that likely won't go unnoticed by President Trump in front of his meeting with Chines President Xi Jinping later this week.
Notwithstanding the "better than expected" trade report, there was little change in the futures market following its release.
That will ensure a negative start for the cash market when the opening bell rings as traders and investors alike appear ready to take some cash out from a frustrating market environment.