The worst retail sales report in nearly ten years triggered a decline in the S&P 500 of exactly 7.3 points, or 0.27%. In other words, that report did almost nothing to upset a market that has surged nearly 400 points, or 16.8%, since its low on December 24.
This market is enjoying an out-of-body experience right now, where it floats above weak data and downward earnings revisions, supported by reports that the U.S. and China are making progress toward a trade agreement -- or at least progress toward an agreement not to make things worse -- and that the Federal Reserve is progressing toward a more dovish-minded policy stance.
It's a meditative practice that has been a calming influence following the volatility of the fourth quarter, yet the duration of the meditative period makes one wonder just how long it can last.
More and more reports are surfacing suggesting the market is overbought, but conversely, more and more reports are also surfacing suggesting the market is still under-owned by fund managers and retail investors who de-risked during the fourth quarter sell-off and have not participated fully in the subsequent rebound.
The latter is a latent catalyst to keep this party going and a trigger for buying on dips that do happen occasionally.
That doesn't make it a sure thing, though; rather, it simply feeds the belief that the prevailing price trend could have some staying power until, well, it doesn't for reasons that have yet to bring the market back to its corporeal form that should look more like a "dad-bod" given the trend in earnings estimates.
Lo and behold, the futures market is sporting a positive bias this morning, bolstered by news that the U.S. and China are working toward a memorandum of understanding regarding trade issues that could become the foundation for an eventual agreement signed by President Trump and President Xi.
Still, it is also being reported that much work is left to do, particularly on the stickiest of issues pertaining to forced technology transfers, enforcement oversight, and China subsidizing domestic industries. Talks will continue next week in Washington, which will indeed be open fully for business after Congress passed a funding resolution that the president has said he would sign.
The emphasis for market participants, nonetheless, is that progress has been made. Alas, it is thought more progress can be made for the major indices.
Currently, the S&P 500 futures are up 11 points and are trading 0.4% above fair value. The Nasdaq 100 futures are up 34 points and are trading 0.4% above fair value. The Dow Jones Industrial Average futures are up 97 points and are trading 0.3% above fair value.
Better-than-feared guidance from semiconductor company NVIDIA (NVDA) has aided the the tone in the futures market. Shares of NVDA are indicated 5.7% higher. PepsiCo (PEP), however, may be most indicative of the tone that has prevailed in the stock market this year.
PepsiCo missed the S&P Capital IQ consensus earnings estimate by a penny and issued FY19 EPS guidance that is below the current consensus estimate, yet its stock, which is up 6.3% from its December 24 low, is indicated 2.3% higher.
Some moves in earnings season are tough to explain, which is why it is euphemistically referred to as the "silly season."
Anyhow, the market has also taken some comfort in this morning's economic reports.
The New York Fed's Empire State Manufacturing Survey checked in at 8.8 for February (Briefing.com consensus 7.0), up from 3.9 in January. Notably, firms were more optimistic about the six-month outlook, evidenced by a 15-point increase in the index for future business conditions to 32.3.
Separately, the Import-Export Price Indexes for January tracked in a way that should keep the Federal Reserve tracking on its patient-minded path.
Import prices fell 0.5% in January and are down 1.7% over the last 12 months. Excluding fuel, they are down 0.2% over the last 12 months. Export prices declined 0.6% in January and are down 0.2% over the last 12 months. Excluding agricultural products, export prices are also down 0.2% year-over-year.
The futures market moved to its best levels of the morning following the data, which is setting the market up for more levitation at the start of trading.