The market has been on a winding, and winning, road this week, navigating an avalanche of earnings news, trade discussions, and economic data. Entering today's session, the S&P 500 is up 1.3% for the week.
Arguably, the positive bias is best seen in the underperformance of the S&P 500 information technology sector, which is up "only" 0.9%. We point this out knowing Facebook (FB) just suffered the largest, single-day loss of market value of any company in U.S. stock market history.
The remarkable aspect is that Facebook's flop didn't have much of a wave effect. Granted it caused some ripples of weakness here and there, yet the S&P 500 dropped just 0.3% on Thursday; meanwhile, the Russell 2000 was up 0.6% and the Dow Jones Industrial Average increased 0.4%.
A crowded Facebook trade was essentially disbursed to other reaches of the market, which is what happens when one company's woes are basically interpreted as company-specific issues.
Similarly, when one company's strength is seen largely as company-specific, a good showing in that company's stock doesn't necessarily fuel a broad market rally.
Enter Amazon.com (AMZN), which is up 4.5% in pre-market trading after delivering a blowout second quarter earnings report and providing pleasing operating income guidance for the third quarter.
The S&P futures were down one point and trading just 0.1% above fair value with Amazon's good news front-and-center for everyone to see. In other words, there weren't many bullish tributaries flowing from Amazon.
Weakness in Intel (INTC), Twitter (TWTR), ExxonMobil (XOM), Colgate-Palmolive (CL) and Starbucks (SBUX) following their earnings results has tempered some of the market's excitement and has offset gains in the likes of Merck (MRK), Chipotle Mexican Grill (CMG), Lam Research (LRCX), and Amgen (AMGN) following their reports.
The strong second quarter GDP report didn't change the pre-open dynamic either. That's partly because it was in-line with expectations and partly because the build up to the report suggested it was apt to be so much more.
The S&P futures are now up less than a point, the Nasdaq 100 futures are up 22 points, and the Dow Jones Industrial Average futures are down four points.
Specifically, real GDP increased at a seasonally adjusted annual rate of 4.1% on the heels of an upwardly revised 2.2% increase (from 2.0%) in the first quarter. The BEA released comprehensive updates to GDP in conjunction with today's report that span from 1929 through the first quarter of 2018.
Focusing on the second quarter of 2018, consumer spending was the main engine of growth, increasing 4.0% and contributing 2.69 percentage points of growth. The other big contributor was net exports, which added 1.06 percentage points. Gross private domestic investment subtracted 0.06 percentage points, with the change in private inventories factoring heavily by subtracting 1.06 percentage points.
Real final sales of domestic product, which excludes inventory changes, were up a hefty 5.1%.
The key takeaway from the report is that real GDP growth was the strongest it has been since the third quarter of 2014. The key concern for some, though, is that it may not be sustainable given that export growth was likely juiced by pre-tariff activity.
The latter will remain a point of economic debate, and the Treasury market seems to be choosing the softer side for the time being. Yields have dropped across the curve in the wake of the GDP report.
First impressions don't always last, though, so take the initial trading response with a grain of salt.
(Editor's Note: the original comment indicated real final sales of domestic product increased 3.9% when it should have said 5.1%)