Monday's rally was a stealth rally if there ever was one. It snuck up on a lot of people who weren't expecting the scope of the gains seen, which is precisely why the major indices registered some good-sized gains to begin the week.
There was a bit of a relief bid that geopolitical tensions weren't unduly exacerbated over the extended weekend; there was some short-covering activity; and there was some opportunistic trading speculation.
It needs to be noted that the light-volume rally effort stopped short of the 50-day simple moving average for the S&P 500 (2354.30), so Monday's advance certainly can't be described as a breakout advance.
That moniker won't be applied at today's open either. The S&P futures are down seven points and are trading 0.3% below fair value.
That's with Bank of America (BAC), Netflix (NFLX), United Health (UNH), UnitedContinental (UAL), Johnson & Johnson (JNJ), and Harley-Davidson (HOG) all exceeding analysts' average earnings estimates for the March quarter.
One luminary noticeably absent from the upside surprise list is Goldman Sachs (GS). The investment bank fell shy of analysts' average expectation and its stock is falling shy as a result. Shares of GS are down 2.6% in pre-market action, which will weigh on the Dow and the S&P 500 financial sector.
The earnings results, therefore, have failed to whet any follow-through appetite for buyers. The fact of the matter, though, is that the bulk of the weakness in the futures market was established in the overnight session, with major European markets quickly sinking after their extended Easter weekend reopening.
The UK's FTSE 100 (-1.8%) is at the front as a loss leader, with investors reacting negatively to Prime Minister May calling for a snap election on June 8.
That call still needs to be confirmed by a two-thirds majority vote in Parliament, yet reports suggest that is likely to happen when it comes to the floor on Wednesday. Some of the dismay among investors is linked to the prior understanding that Ms. May said the next general election wouldn't be held until 2020.
With all of the ruckus over the Brexit vote and the exit process, we suspect there is a bit of voting fatigue factoring into matters as well as a little concern that the early effort by Ms. May to expand her majority implies the exit negotiation with the EU could take on a more hostile tone as a leader with a greater majority finds more reason to stand her ground.
All of this is just adding to the political and economic intrigue surrounding the European Union ahead of the first round of voting this Sunday in the French presidential election.
To be sure, global markets are gripped with politics, and that grip is tighter some days more than others.
There wasn't any real tightness in the March housing starts report, however. It ran a bit loose with starts checking in at a seasonally adjusted annual rate of 1.215 million units (Briefing.com consensus 1.256 million), down 6.8% from the upwardly revised rate of 1.303 million (from 1.288 million) for February.
The downturn in starts was evenly balanced with single-family starts down 6.1% to 821,000 and multi-unit starts down 7.9% to 394,000. Single-family starts were flat or down in every region, with the exception of the South (+3.2%). The Midwest saw the largest decline, with single-family starts down 35% from February.
Building permits, on the other hand, jumped 3.6% to a seasonally adjusted annual rate of 1.260 million (Briefing.com consensus 1.240 million); however, that was due entirely to permits for multi-unit dwellings. Single-family permits fell 1.1% to 823,000, which is a discouraging indicator for a housing market very much in need of new supply at lower price points.
Overall, there will be a lower price point for the cash market when the opening bell rings.
One of the keys to how well it withstands that early selling pressure will be how the financial sector performs. If it can exhibit relative strength, buyers could soon return to the fold, but if the sector relinquishes a good chunk of yesterday's 1.6% gain and shows little sign of life, the broader market could very well follow suit.