The futures market has gone a little ex post facto this morning, as it has reportedly been beaten down by concerns related to the remarks President Trump made on Tuesday around 1:30 p.m. ET.
Currently, the S&P futures are down 17 points and are trading 0.6% below fair value. The Nasdaq 100 futures are down 67 points and the Dow Jones Industrial Average futures are down 179 points. The cash market is clearly on course, then, for a negative start.
We would concede that what the president said yesterday is a contributing factor to this morning's weakness, yet we struggle to accept it as the only factor.
Recall that the stock market didn't weaken noticeably on Tuesday until about an hour after the president said he isn't satisfied with the China trade discussions, that no deal has been worked out with China to save ZTE Corp., that he was disillusioned by North Korea's attitude change after meeting with Chinese President Xi, and that there is a substantial chance the North Korea meeting will not work out on June 12.
These remarks didn't help matters, yet this marketplace doesn't take an hour to make its thoughts known. The delayed selling was catalyzed by technical selling interest, exacerbated by thin trading conditions, and compounded by an ex post facto assessment of the president's statements.
In other words, when the market buckled somewhat inexplicably late in Tuesday's session, the president's remarks quickly came to the fore as the news-driven basis for the selling interest in a market, we might add, that trades news in milliseconds.
The weak finish on Wall Street carried over to foreign markets today.
Major indices in Asia and Europe have been undercut by selling interest attributed to the remarks made by President Trump. Europe for its part is also dealing with some fiscal angst related to the specter of a populist government coming to power in Italy that espouses a platform certain to drive up budget deficits.
Our take on matters is that there is an absence of buyers today, more so than a gaggle of concerted sellers, that is eroding the complexion of the futures market.
The lack of buying interest stems from a beleaguered feeling of being whipsawed by shifting opinions on political matters, such that the desire to play in this market ahead of a three-day weekend just isn't there. Many market participants are essentially checking out, tired of the good cop-bad cop jawboning.
In other developments, the House voted in favor of a Dodd-Frank reform bill, as expected, that will reduce regulations for many banks. The expectation that would be the case contributed to the relative strength seen yesterday in the banks and the broader financial sector.
There have been a number of retailers reporting earnings, including the likes of Target (TGT), Lowe's (LOW), Tiffany & Co. (TIF), and Ralph Lauren (RL). TIF is up 14.7% in pre-market trading; LOW is up 4.4%; RL is up 3.3%; and TGT is down 4.4%.
The response to those reports, and guidance, has been mostly positive, yet it hasn't altered sentiment in the futures market. Neither have reports that Comcast (CMCSA) is getting ready to make a "superior all-cash" offer for the assets of Twenty-First Century FOX (FOXA) after the spin-off of the "New Fox."
As a reminder, the New Home Sales Report for April (Briefing.com consensus 677,000) will be released at 10:00 a.m. ET and will be followed by the FOMC Minutes from the May meeting at 2:00 p.m. ET.
There is a lot out there to chew on and the stock market appears to have a case of indigestion at the moment that will lead to a lower open.