President Trump's State of the Union Address last night was wide reaching, as expected, but for the most part, it wasn't market moving. That isn't much of a surprise either since the market isn't expecting much, if any, agreement in Congress on major legislative issues.
The market's main interest with respect to politics right now is the U.S.-China trade talks and there wasn't anything too telling in last night's speech on that particular topic, which is a bouncing ball in terms of influencing market sentiment.
Treasury Secretary Mnuchin and U.S. Trade Representative Lighthizer will be going to China next week to continue the trade talks, yet a lot of vagueness remains around the crux of the trade talks -- making structural changes and enforcement/oversight of those structural changes -- that neither side seems totally convinced a trade deal will happen by March 1.
The senior players are all coyly dancing around the topic, keeping hope alive, but not necessarily making an agreement sound like a slam dunk.
In any event, the stock market so far this year has traded up, through, and around political matters, maintaining hope that a trade deal will be made, but ultimately riding the deal the Federal Reserve has struck with the market to be patient with its policy approach.
Yesterday, the stock market continued its bullish charge off the December 24 low, carrying the S&P 500 to the doorstep of its 200-day moving average (2741). A knock was made, but no one answered, and the S&P 500 finished just shy of that key technical level.
The S&P 500 will remain shy of that level when trading starts today. Currently, the S&P 500 futures are up one point, but are trading 0.2% below fair value. The Nasdaq 100 and Dow Jones Industrial Average futures are also presaging modest declines when the opening bell rings.
There have been a lot of earnings reports since yesterday's close. Dow component Walt Disney (DIS) was the headliner and is indicated 0.7% higher after topping fiscal first quarter estimates.
Snap (SNAP), meanwhile, is the trading toy du jour. It is indicated 22% higher with investors reportedly enthused by the understanding that the number of daily active users was sequentially flat in the fourth quarter and that the company doesn't expect a sequential decline in the first quarter. That's a view that was better than feared and appears to be the catalyst for a short squeeze that is driving the outsized gains.
Conversely, Electronic Arts (EA) is down 14.7% after topping fiscal third quarter estimates, but disappointing with its fiscal fourth quarter guidance. Eli Lilly (LLY) for its part is down 1.0% after issuing disappointing FY19 guidance.
Drug and health care stocks will be a talking point throughout the day given the president's contention last night that drug and health care costs need to come down -- a remark that was met with bi-partisan applause.
There could be some clapping for this morning's trade balance report for November when there really shouldn't be.
The trade deficit narrowed to $49.3 billion in November (Briefing.com consensus -$55.5) from a revised $55.7 billion (from -$55.5 billion) in November. Clap-clap-clap.
Really, though, hold the applause. The trade deficit narrowed, because imports fell more than exports, yet the key takeaway from the report is that both exports and imports were down in November from the prior month, which fits with a slower growth narrative.
Exports of $209.9 billion were $1.3 billion less than October exports due largely to a $1.4 billion decrease in industrial supplies and materials. Imports of $259.2 billion were $7.7 billion less than October imports due largely to a $4.3 billion decrease in imports of consumer goods, which included a $2.3 billion decrease in cell phones and other household goods.
Trade hawks might take some solace, though, in the fact that the deficit with China decreased $2.8 billion to $35.4 billion in November.