The S&P 500 futures are trading roughly in-line with fair value, which is setting the stage for a relatively flat open.
That opening indication doesn't sound all that interesting, but it really is when taking into account that JPMorgan Chase (JPM) fell short of earnings estimates for the first time in 15 quarters, Delta Airlines (DAL) issued a first quarter warning, and Sherwin-Williams (SHW) cut its FY18 adjusted EPS outlook, citing a disappointing fourth quarter performance.
Furthermore, the Producer Price Index for December and the Empire State Manufacturing Survey were both weaker than expected, adding to the concerns about an economic slowdown
The futures indication is interesting, then, because one might have thought it would be more negative following the aforementioned disappointments. The ability to weather those disappointments will likely give rise to the contention that they were already priced in during the December rout in stock prices.
There is going to be a lot of rationalizing during this particular earnings reporting season and the rationalizations will be massaged to fit the trading tone of the moment.
The trading tone to this point in the new year has been generally constructive. There has been a persistent inclination to buy into weakness and a persistent appreciation for the notion that the Federal Reserve is backing away from a tightening bias.
Today's data will support the latter notion.
The Producer Price Index for final demand declined 0.2% (Briefing.com consensus -0.1%) while the index for final demand, less food and energy, declined 0.1% (Briefing.com consensus +0.2%). Most of the drop in the index for final demand was the result of a 5.4% drop in the index for final demand energy.
The monthly changes left the index for final demand up 2.5% year-over-year, unchanged from November, and the index for final demand, less food and energy, up 2.7%, also unchanged from November.
The key takeaway from this report is that producer price inflation is moderating, which will suggest in the market's mind that consumer price inflation is going to as well.
The Empire State Manufacturing Survey General Business Conditions Index fell to 3.9 in January (Briefing.com consensus 12.2) from 11.5 in December, led by a deceleration in new orders, inventories, and the number of employees. The six-month outlook also dropped, falling to 17.8 from 30.6.
The key takeaway from the report is that it fits the view that there is a slowdown in manufacturing activity, which has piqued concerns about a broader slowdown in economic activity unfolding in 2019.
The "good" news in these reports is that they should keep the Fed in a patient mindset, yet the "bad" news is that they are providing anecdotal evidence that points to the prospect of slower earnings growth in 2019.
In other developments, market participants are keeping a close watch today on the vote regarding Prime Minister May's Brexit plan. That vote is expected in the UK Parliament around 2:00 p.m. ET and it is also expected by most pundits to be shot down, which will raise the stakes surrounding a potential no-deal Brexit.