The stock market had a good day on Tuesday. It rallied around what was bad news on an absolute basis (implementation of new tariffs on Chinese imports and China retaliating with new tariffs on U.S. imports) but good news on a relative basis (initial 10% tariff rate not as harsh as expected).
This bull market has feasted on relativity. Hence, while the rally on Tuesday was a bit confounding at face value to this analyst considering how things unfolded Monday amid "tariff concerns," there is a basis to admit, too, that the rally wasn't surprising.
There won't be any rally efforts to contemplate at today's open nor any big sell-offs for that matter.
The S&P futures are down three points and are trading less than 0.1% below fair value. The Nasdaq 100 futures are down five points and the Dow Jones Industrial Average futures are down 17 points.
Not surprisingly, trade matters continue to dominate the market narrative. One of the more prominent story lines today is that China seems to be limited with its response capabilities, lest it risk doing greater harm to its own economy.
On a related note, Reuters reports that Premier Li Keqiang told the World Economic Forum that China isn't going down the road of relying on yuan depreciation to stimulate exports while a CNBC report indicates he also said China has prepared the policy tools necessary to deal with risks and challenges.
Those remarks have not incited market participants this morning who have been slow to react in general, with the exception perhaps to pot stocks like Tilray (TLRY), which is indicated 46% higher in pre-market trading after the company's CEO suggested in an interview with CNBC that his business is a "smart hedge" for major drug manufacturers.
To be sure, the pot stocks are still riding high (bad pun intended) even if the broader market isn't.
The Housing Starts and Building Permits Report for August didn't move the needle either as it was a mixed report.
Privately-owned housing starts increased 9.2% month-over-month to a seasonally adjusted annual rate of 1.282 million (Briefing.com consensus 1.229 mln) while building permits declined 5.7% month-over-month to a seasonally adjusted annual rate of 1.229 million (Briefing.com consensus 1.310 mln).
The key takeaway from the report is that permits (a leading indicator) for single-family homes fell 6.1% month-over-month to 820,000, driven by declines across all four geographic regions.
Single-family starts in August increased 3.0% in the South and 14.2% in the West, yet they were down 10.4% in the Northeast and 14.0% in the Midwest.
The number of units under construction at the end of the period increased 0.8% to 1.131 million. That left the third quarter average at 1.127 million, which is slightly above the second quarter average, making it a positive input for third quarter GDP forecasts.
The latter understanding has not spooked the Treasury market, which showed some inflation angst yesterday. The 10-yr note yield is unchanged so far at 3.05%.