EmailThe stock market isn't on a roll. It's on a rollover.
The futures for the major indices are pointing to losses at the open, with interest rate and growth concerns at the reported heart of losing matters. Currently, the S&P futures are down nine points (after being down 18 points earlier) and are trading 0.1% below fair value. The Nasdaq 100 futures are down 13 points and the Dow Jones Industrial Average futures are down 69 points.
All eyes have turned back to the Treasury market, which is open again after being closed for Columbus Day. The action there isn't anything special and that's kind of the problem.
With an extended break to think about the recent spike in rates, market participants haven't come rushing back to buy into the weakness.
The yield on the 10-yr note is unchanged at 3.23% (after hitting 3.26% earlier) and the yield on the 30-yr bond is also unchanged at 3.40% (after hitting 3.44% earlier). That's not a major move in its own right, but it's the persistence of a major move that has proven unsettling to the stock market.
Accordingly, equity investors are showing some reluctance to buy into the (recent) weakness of the equity market, which has been driven by a selloff in highly-valued growth stocks and crowded mega-cap names like Amazon.com (AMZN) and Apple (AAPL).
That selling prompted a breach of the S&P 500's 50-day moving average (2878.45) on Monday, yet that breach was ultimately repaired and the broader market made a nice comeback effort that left the S&P 500 sitting above that key technical support level by the closing bell.
Ah, but the 50-day moving average will be put to the test again when the opening bell rings, so look for some technically-based action to be part of today's market narrative and look for the behavior of the information technology sector to be a guiding influence.
In other matters, the IMF has lowered its global growth outlook for 2018 and 209 to 3.7% from 3.9%, citing in part the retardant of trade actions and trade uncertainty.
The downgraded growth forecast isn't jarring, yet it plays right into the concerns of late pertaining to the prospect of a growth slowdown due to tariff actions and rising interest rates. In other words, it's something that will fuel the debate about the U.S. economy hitting/nearing peak growth.
In the same vein, a third quarter earnings warning from specialty chemicals company PPG Industries (PPG) will play into concerns about hitting/nearing peak earnings growth as the company's warning was attributed to various factors that are at the heart of concerns about economic activity and rising interest rates.
Specifically, PPG blamed cost inflation, softening demand in China, and weaker automotive refinish sales in Europe and the U.S. due to lower end-use market demand.
This is just one company, but if more and more companies call attention to cost pressures and/or softer demand as a basis for tempered earnings guidance during the third quarter reporting period, then multiple expansion will be harder to come by even if the third quarter earnings results themselves are impressive in aggregate.
The third quarter reporting period begins in earnest this Friday with results from JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC).
On a related note, Delta Air Lines (DAL) will report its results before the open on Thursday. American Airlines (AAL) for its part said this morning that it expects total revenue per available seat mile to be up approximately 2-3% year-over-year for the third quarter versus its prior guidance of up 1-3%.
That news has given shares of AAL a modest boost in pre-market action, which will be supportive for the Dow Jones Transportation Average.
