The stock market didn't behave as well on Wednesday as many people might have thought it would following Apple's (AAPL) impressive earnings report. That is one of the main reasons this morning why there isn't much buying conviction. Conversely, there isn't much selling conviction either because the stock market also demonstrated yesterday that (in baseball terms) it is still a "tough out."
The popular headline in the popular press is that the Dow Jones Industrial Average climbed above 22,000 and closed at yet another record high, led by Apple, which gained 4.7% and traded to a new all-time high of its own.
The subtext, however, is that the S&P 500 and Nasdaq Composite barely budged from their previous closing levels while the Russell 2000 and S&P MidCap 400 declined 1.1% and 0.7%, respectively.
In other words, Apple's good earnings news didn't really move the market, which generated a sense that the next leg higher won't be easy to come by for the time being and that the broader market is perhaps entering a consolidation phase, stifled by valuation concerns and an awareness that it is vulnerable to a notable setback, because of its stretched valuation, if the right headline catalyst hits.
Thus far, the stock market has looked past every negative political headline, partly because it has had good earnings news upon which to focus and partly because it has had little regard for all of the talk out of Washington that hasn't been backed by any action.
The stock market will pay more attention to Washington when words turn into actual action, whether it be positive or negative.
The nagging concern at this record-high juncture for the stock market is that it is about to be in a post-earnings season lull, which means the likely headline catalysts are going to revolve around (geo)politics, the Fed, and the economy, none of which are an indisputably positive force for the stock market right now like the earnings news has been.
Accordingly, the stock market seems situated for a late-summer lull in the buying action as it awaits some type of news that justifies the next leg higher or a new leg lower.
There isn't much in the way of news since yesterday's close that has changed the market's calculus.
Tesla (TSLA) had an earnings report that was better than expected, never mind that the company didn't actually report any earnings. TSLA is up 5.5% in pre-market action, which is good for its stock, but isn't moving the market.
The same can be said for the weekly initial claims report, which was pretty much in-line with expectations and its long trend of signaling a tight labor market.
Initial claims for the week ending July 29 decreased by 3,000 to 240,000 (Briefing.com consensus 242,000) while continuing claims for the week ending July 22 also slipped by 3,000 to 1.968 million. The latest week is the 126th straight week that initial claims have been below 300,000.
The ISM Non-Manufacturing PMI report for July (Briefing.com consensus 56.9; prior 57.4) and the Factory Orders Report for June (Briefing.com consensus +2.9%; prior -0.8%) will be released at 10:00 a.m. ET.
Separately, the Bank of England voted 6-to-2 to keep its key policy rate unchanged at 0.25% and offered a requisite warning that rates could potentially move up more than the market currently expects. The British pound is down 0.8% at 1.31 against the dollar this morning, showing that traders aren't exactly fearing the BOE's warning.
At the moment, the S&P futures are flat and are trading slightly below fair value while the Nasdaq 100 futures and Dow Jones Industrial Average futures are both trading slightly above fair value. The stage is set, then, for a mixed open, which is consistent with the market's mixed performances of late.