Equity index futures are trading higher this morning, which is paving the way to a higher start for the cash market. Currently, the S&P futures are up eight points and are trading 0.4% above fair value. The Nasdaq 100 futures are up 26 points and the Dow Jones Industrial Average futures are up 68 points.
The upside bias is being attributed primarily to a rebound in the Turkish lira and emerging market currencies, as well as the encouraging earnings report and outlook from Dow component Home Depot (HD).
The move in the lira can only be characterized as a technical bounce following the huge losses incurred over the past two sessions. After all, it's not like there has been a thawing in U.S. relations with Turkey. To that end, CNBC reports that Turkish President Erdogan said Turkey will boycott U.S. electronics, including Apple's (AAPL) iPhone.
Some are pointing to the idea of the Turkish central bank providing liquidity support as the basis for the rebound in the currency, yet the central bank made that announcement before yesterday's open and the lira didn't move up against the dollar on Monday; hence, the conclusion that the lira -- and other currencies -- are being driven more by technical action than anything else.
Even so, the technical bounce has put a little spring in the U.S. market's step after four straight losing sessions. The question is, will the market maintain a bullish stride into the close or will it get tripped up, like it did on Monday, with an inclination to sell into the strength?
Shares of Home Depot will be lending support. They are indicated 2.6% higher after the home improvement retailer easily topped the consensus second quarter earnings estimate on strong same-store sales and raised its full-year guidance.
Home Depot's report will be a positive for the retail industry and consumer discretionary sector, as will the earnings report from Advance Auto Parts (AAP), which also topped consensus estimates and raised its full-year revenue guidance. Shares of AAP are up 6.3%.
Look for the energy sector to forge a rebound try, too. Oil prices are up 1.3% to $68.03 per barrel. That move will presumably put some wind in the sails of the energy stocks, which comprised the worst-performing sector on Monday.
With the positive tone in the futures market, it is also reasonable to expect some leadership out of the information technology sector, which usually runs out front in a risk-on trading environment.
Remarkably, the market hasn't gotten too caught up on the weaker than expected data reported by China last night. Industrial production (+6.0% yr/yr), fixed asset investment (+5.5% yr/yr), and retail sales (+8.8% yr/yr) for July all fell short of expectations and year-over-year growth rates were either in-line with, or slightly softer, than the prior month.
There is some modest weakness in copper prices ($2.72/lb, -$0.01), but other than that, the data have been glossed over amid the fixation on the currency trade.
There hasn't been much fixation either on the Import-Export Price Index for July.
Import prices were unchanged after declining an upwardly revised 0.1% (from -0.4%) in June. Excluding fuel, import prices were down 0.3% for the second month in a row. Export prices declined 0.5% after increasing 0.2% in June. Excluding agricultural products, export prices were unchanged after increasing an unrevised 0.4% in June.
On a year-over-year basis, nonfuel import prices were up a tame 1.3%. Non-agricultural export prices, on the other hand, were up 5.0%.
The key takeaway from the report is that it seemingly reflects some of the effects of a stronger dollar as nonfuel import prices declined month-over-month in both June and July.