Might the U.S. lift some, or all, tariffs on Chinese imports in an effort to advance negotiations for a larger trade deal by March 2? That was the suggestion made yesterday in The Wall Street Journal, which reported, citing people close to the matter, that Treasury Secretary Mnuchin had floated just such an idea.
Not surprisingly, the stock market loved the idea.
What's more remarkable, though, is that the stock market loved the idea even though the same report said U.S. Trade Representative Lighthizer was not in favor of such an approach, saying it would weaken the U.S. position, and even though CNBC said a Treasury spokesperson and the White House both shot down the report, saying there has been no talk of lifting tariffs now.
Those refutals aside, the S&P 500 cleared resistance Thursday at its 50-day moving average (2626) and is indicated to open higher today.
The S&P futures are up 14 points and are trading 0.5% above fair value. The Nasdaq 100 futures are up 41 points and are trading 0.5% above fair value. The Dow Jones Industrial Average futures are up 166 points and are trading 0.6% above fair value.
Officials might be denying the talks happened, yet the stock market is denying the denials. In effect, it is running with its own narrative -- and that narrative holds out hope that a trade concession of some kind will be reached by March 2 that enables both sides to save face and restores some order and confidence to the trade outlook.
That's the perspective right now anyway that resonates in a market with a V-shaped mind, and which has been aided and abetted by the restoration of the Fed put.
This trade view has overshadowed a good bit of corporate news since yesterday's close, including a mixed earnings report from Netflix (NFLX), a better than expected earnings report from Dow component American Express (AXP), an earnings miss from oil services giant Schlumberger (SLB), an FY19 EPS warning from drug maker Eli Lilly (LLY) following a disappointing drug trial, and a disappointing holiday sales update and tempered earnings guidance from jewelry retailer Tiffany & Co. (TIF).
In addition, Tesla (TSLA) said it will be cutting ~7% of its full-time staff, warning the road ahead is "very difficult" as it attempts to ramp up Model 3 production, and CVS Health (CVS) and Walmart (WMT) have reportedly worked out a new pharmacy benefit management network deal.
We could go on, but the point is that there is a lot of news to take in this morning and we haven't even touched the ongoing government shutdown, the ongoing Brexit uncertainty, and the ongoing softness in foreign economic data, like Japan's December core CPI report.
That's not to say none of it matters, but it's fair to say the stock market is not being swayed at this time by negative matters as it continues to confide in its friend, which is the trend.