The S&P 500 has rallied 1.9% in two sessions this week. That's a solid showing, but we'll stop short of calling it a strong showing considering the financial sector has underperformed during the rally effort.
The S&P 500 financial sector is up just 0.4% this week despite a host of companies checking in with better than expected earnings results. Morgan Stanley (MS) is the latest among them.
Shares of MS are indicated 2.2% higher in pre-market trading, but if the way JPMorgan Chase (JPM), Bank of America (BAC), and Goldman Sachs (GS) traded after their reports is any indication, there is no guarantee the gain in MS will hold up. Each of the aforementioned stocks succumbed to selling pressure after their results.
For now, the indication in MS is acting as a supportive factor for the equity market, which is also getting a lift from an expected boost in the energy sector, as oil prices rise (+1.7% to $67.65) following some bullish API inventory data, and from the transport stocks, as United Continental (UAL) and CSX Corp (CSX) impressed with their latest results.
Shares of UAL and CSX are indicated 3.2% and 4.7% higher, respectively.
The S&P futures are up nine points and are trading 0.3% above fair value. The Dow Jones Industrial Average futures are up 75 points, and the Nasdaq 100 futures are up 14 points.
Things could be better, but IBM (IBM) and Lam Research (LRCX) are holding things in check a bit. Both companies surpassed quarterly earnings expectations, yet each in its own way had some shortcomings that have fueled selling interest after both stocks had moved up sharply in recent weeks.
IBM's gross margins and FY18 guidance reportedly didn't measure up to higher expectations while June quarter shipments guidance from Lam Research failed to impress. IBM is down 5.5% and LRCX is down 4.1%.
All in all, though, the broader market is fighting to retain the bullish bias that has taken hold since April 2.
Its fighting spirit has been nurtured by the lack of any new, and nettlesome, headlines on trade and geopolitical matters, as well as the good earnings news that was expected but appreciated just the same at a time when the market needed a stabilizing influence.
The collapse in the CBOE Volatility index, which has plunged 36% since April 2, has reflected a hopeful belief that downside risk will be limited over the next 30 days as participants appear no longer to be running for hedging cover.
That perspective can change in the flash of a new headline, but it has nonetheless helped draw in sidelined participants aiming to capture some lightning in what may only be a short-term rebound bottle.
The rebound effort has driven the Dow, Nasdaq, Russell 2000, and S&P 500 back above their 50-day simple moving averages, which has helped foster some momentum-based buying interest and perhaps a fear-of-missing out within the speculative crowd.
However, the low volume that has accompanied the recent gains, as well as the underperformance of the financial sector and the resilient nature of the Treasury market, has spurred some doubts about the sustainability of the stock market's rally effort.
We shall see what unfolds in due time, but the time this week (and this month) so far has been on the side of the bulls.