The stock market delivered another classic (and record-setting) performance on Monday. We call it "classic" because the market never sold off on the shutdown uncertainty, yet it rallied anyway on the news of an agreement to fund the government through February 8.
It was a kick-the-can-down-the-road approach by Congress, which ultimately resorted in another kick in the behind for short sellers waiting for this stock market to get rolled back.
The funding resolution buys some time, but there isn't a whole lot of faith in the idea that Congress will avoid another game of brinkmanship leading up to the February 8 deadline.
We'll see what we see soon enough. It may be politics as usual in Washington DC, yet it's business as usual on Wall Street, which is translating into further gains for the major indices and a deepening fear of missing out on further gains for sidelined participants.
The fact that the stock market is overbought on a short-term basis and that investor sentiment is hitting bullish extremes are common denominators in most market commentary. They are the basis for why many pundits think a pullback is imminent.
A consolidation phase wouldn't surprise anybody, yet the staying factor for many in the market already is that a lot of sidelined participants are hoping for a pullback to put money to work. In other words, they see a qualifying basis to remain in the market knowing there are interested buyers waiting in the wings who could provide the fuel for the next leg higher.
That bullish outlook is being fortified, too, by rising earnings expectations. Analysts are playing catch up with the tax reform impact. According to FactSet, S&P 500 earnings for all of 2018 are now projected to increase 18.6%, versus 11.1% on December 1.
The earnings news since yesterday's close has been generally supportive to the earnings outlook. Netflix (NFLX) wowed investors with its subscriber growth and first quarter guidance and is indicated 11% higher.
Dow component Procter & Gamble (PG) topped fiscal second quarter earnings and raised the high end of its fiscal 2018 EPS growth guidance range. Fellow Dow component Travelers (TRV) blew past the consensus fourth quarter earnings estimate while Johnson & Johnson (JNJ) beat estimates and issued FY18 guidance above expectations. Verizon (VZ) came up a bit shy, but seems to have pleased with its revenue performance and revenue outlook.
Separately, JPMorgan Chase (JPM) announced a $20 billion, five-year investment plan, which will include higher wages for 22,000 employees, hiring 4,000 more workers, and opening 400 new Chase branches.
That is all good, and it is the type of news that fits well with the economic and earnings outlook narrative. The futures market, though, has been slow to respond.
The S&P futures are down three points, the Nasdaq 100 futures are down four points, and the Dow Jones Industrial Average futures are down 10 points.
With the move the major indices made yesterday, though, and the move they have made since the beginning of the year, it is easy to understand why the futures market isn't in overdrive for the opening indication.
What matters most for the stock market right now, however, isn't how it opens, but how it behaves after the open. The resilience to early selling efforts has been a rallying point time and time again, so everyone will be watching to see if a similar outcome happens today.
There won't be any economic data of note to move things along, yet there should be plenty of interesting headlines out of the World Economic Forum in Davos, which begins today, and perhaps out of Montreal where round six of the NAFTA negotiations is getting underway.
In other developments, the Bank of Japan voted 8-1 to leave its policy rate at -0.1% and to continue its yield curve control policy so that long-term rates remain around 0.0%. Those decisions were expected, yet there was some enthusiasm behind the understanding that the Bank of Japan didn't hint at any early withdrawal of its ultra-easy policy.