The stock market is in a good mood this week. That much is clear.
The major indices are up between 1.4% and 2.1%; gains have been logged by nine out of 11 S&P 500 sectors; and the Nasdaq Composite and Russell 2000 have continued to set record closing highs.
The recognition that the stock market has behaved as well as it has, despite a deteriorating trade backdrop, the rise to power of a euroskeptic coalition in Italy, chatter that the ECB is going to start discussing an end to its QE program, and warnings from airlines about the negative impact of higher fuel costs, has been news in and of itself.
In fact, the resilience of the stock market, which has been underpinned by the outperformance of the technology, retail, and financial stocks, has been a catalyzing factor in the sense that it has spurred some fear about missing out on further gains and short-covering activity.
It has also spurred some speculative trading behavior, evidenced by the outperformance of the iShares Micro-Cap ETF (IWC), which is up 2.1% week-to-date versus the 1.4% gain for the S&P 500.
There isn't any sea change in sentiment this morning either. Granted there is a more subdued tone this morning following yesterday's rally, but what's more notable is that there isn't any rush to sell into the strength.
The S&P futures are up two points and are trading 0.1% above fair value. The Nasdaq 100 futures are down six points and the Dow Jones Industrial Average futures are up 57 points.
In turn, market rates are up again -- not by much, yet they are continuing to backslide as stocks continue to ride high.
The yield on the 10-yr note is up one basis point to 2.99%, which leaves it up 10 basis points for the week in what can be attributed to a risk-on trade.
There hasn't been a lot of "new" news on the macro front. Press reports still suggest the G7 leaders' meeting in Canada promises to be a contentious one, oil prices ($65.33, +$0.60, +0.9%) continue to seesaw on supply considerations, and weekly initial jobless claims continue to run close to historically low levels.
One new item is the confirmation from Commerce Secretary Ross that a definitive agreement has been signed to put Chinese telecom equipment company ZTE Corp. back on its business feet amid conditions that include a hefty fine, an overhaul of the management team, and the implementation of a U.S.-chosen compliance group.
The ZTE business parameters were largely in line with prior reports about what would need to happen to lift the sanctions on the company, so today's news hasn't moved the market needle.
Separately, companies like retailer Five Below (FIVE) and food company J.M. Smucker (SJM) are moving noticeably in pre-market action following their earnings results. FIVE is up 17.5% while SJM is down 8.5%, which pretty much says it all in terms of the tonality of those respective reports.
Regarding the initial claims report, it showed claims decreased by 1,000 to 222,000 (Briefing.com consensus 225,000) for the week ending June 2. Continuing claims increased by 21,000 to 1.741 million for the week ending May 26, which left the four-week moving average at its lowest level since December 8, 1973.
The key takeaway from this report is that the low level of initial claims is consistent with a tight labor market.