They're b-a-a-a-a-c-k... but they really never left the market. The "they" we are referring to are economic growth concerns.
Those concerns have been emerging all year, as we pointed out in last week's installment of The Big Picture. More recently, however, they have been covering the market like a wet blanket, and today, China poured more cold water on that blanket.
China's November industrial production and retail sales reports were weaker than expected, revealing a deceleration in growth from October.
That set a weak tone overnight in the futures market, yet it's unfair to lay all the blame for this morning's negative bias on China.
Thursday's performance from the U.S. stock market planted the seeds as it featured another poor showing from the financial and transportation stocks, as well as the domestically-oriented Russell 2000 small-cap index. In turn, preliminary manufacturing PMI reports for December from Germany, France, and the eurozone this morning were all weaker than expected.
The November Retail Sales report out of the U.S., meanwhile, was better than it might appear at first blush.
Total retail sales increased 0.2%, as expected, while retail sales, excluding autos, jumped 0.2% (Briefing.com consensus +0.3%). An important item to take into account is that there were sizable revisions to the October data for total retail sales (to 1.1% from 0.8%) and retail sales, excluding autos (to 1.0% from 0.7%).
Those revisions should mitigate any sense of disappointment in the "mixed" report for November.
The key takeaway from the Retail Sales report, though, is that core retail sales, which exclude auto, gasoline station, building materials, and food services and drinking places sales, increased 0.9%. That's important because core retail sales are used in the computation of the goods component for personal consumption expenditures in the GDP report.
The latter point notwithstanding, the market hasn't been moved that much by the data. The futures for the major indices were down noticeably ahead of the report and that's where they remain for the most part after it.
Currently, the S&P futures are down 19 points and are trading 1.1% below fair value. The Nasdaq 100 futures are down 60 points and are trading 1.5% below fair value. The Dow Jones Industrial Average futures are down 177 points and are trading 0.9% below fair value.
A trio of widely-held companies -- Costco (COST), Starbucks (SBUX), and Adobe Systems (ADBE), has helped cast a pall on things. They are all trading down in pre-market action.
Costco is off 3.8% after reporting fiscal first quarter revenue below expectations; Starbucks is down 3.8% after announcing it expects FY19 global comparable sales growth to be near the low end of its prior 3-5% range; and Adobe Systems is down 2.5% after failing to overly impress investors with its fiscal fourth quarter results.
This market, however, isn't beholden so much to individual stock moves today as it is to macroeconomic forces and trade matters.
On the latter front, China confirmed it will suspend its added 25% tariff on 211 U.S. vehicle and auto parts items, bringing the tariff rate back to 15% between January 1 and March 1. This move was expected based on previous press reports. The wet-blanket aspect of the announcement is that it hasn't been codified as permanent; moreover, President Trump has already said the 15% rate is still too high and unacceptable.
The stock market for its part hasn't been too accepting of many things recently, particularly buy-the-dip efforts. It has continued to show an inclination to sell into strength, as its confidence in the economic growth outlook and earnings growth outlook has been compromised by the behavior of the market itself.