Today has the makings of being a telling day as there is a lot of good news in the mix that should presumably drive the major indices noticeably higher.
There is good corporate news: Alphabet (GOOG), Amazon.com (AMZN), Microsoft (MSFT), and Intel (INTC) all blew past their respective earnings estimates and are trading up between 3% and 8% in pre-market action.
There is good M&A news: unconfirmed reports suggest CVS/Health (CVS) has made an offer to acquire Aetna (AET) for more than $200 per share.
There is good news from other equity markets: bourses in Europe are mostly higher and Asian markets traded well, with the Nikkei leading the pack with a 1.2% gain.
There is good headline news for the economy: the advance GDP report showed the U.S. economy increased at annual rate of 3.0% in the third quarter (Briefing.com consensus 2.4%), marking the second straight quarter the annualized rate has been 3.0% or higher.
Strikingly, the futures market is containing its enthusiasm.
The S&P futures are up just five points and the Dow Jones Industrial Average futures are up just 23 points. To be fair, the excitement factor is a little more prominent in the Nasdaq 100 futures, which are up 51 points.
Whether the broader market ends up being more responsive as the day progresses remains to be seen. The drivers are there, yet the engine isn't totally warmed up.
Getting back to the GDP report, it looks hot on the surface, but it really provided some engine coolant. Why? Because the headline surprise was driven by the change in private inventories, which contributed 0.7 percentage points.
Real final sales, which exclude the change in private inventories, decelerated to 2.3% from 2.9% in the second quarter on some soft consumer spending activity.
Granted the hurricanes created some temporary growth headwinds, but when the layers are peeled back, the key takeaway is that U.S. economic activity is proceeding largely at the same ho-hum pace, evidenced by the prior 12-quarter average of 2.4% for real final sales.
The Treasury market seems to appreciate the latter point. There was little movement across the curve in the wake of the GDP report, which carried a nice headline surprise.
The 10-yr note yield is currently down one basis point to 2.45% while the 2-yr note yield is down one basis point at 1.62%. Later this morning, I will be posting The Big Picture column, which will discuss the Treasury market's contradiction of the reflation trade.
For stocks, though, there is no contra-indication this morning.
The futures are going with the flow of the good news and are pointing to a higher open for the major indices -- maybe not as high for the broader market as one might have expected, but higher nonetheless as mostly good news has kept the bears at bay.