The S&P 500 information technology sector, and the mega-cap components within it, had a tough day on Monday. The rest of the market, however, toughed things out and fared reasonably well all things considered.
The main consideration, reportedly, was a fantastic claim by North Korea's foreign minister that President Trump had effectively declared war on North Korea, giving North Korea the right to take countermeasures that would include shooting down U.S. bombers flying outside North Korea's air space.
The fact that the information technology sector finished off its lows, that the S&P 500 battled back from larger losses to end the day down just 0.2%, and the recognition that the Russell 2000 and S&P Midcap 400 both closed higher offered a good indication that the North Korea headline was more of an excuse to sell than it was a reason to bail for the exits.
All the North Korean headline did was take a weak start for the information technology sector and make it weaker. In turn, it facilitated some end-of-quarter portfolio rebalancing activity, which tilted in favor of energy from a sector standpoint, small caps and mid caps from a market capitalization standpoint, and value from a style standpoint.
Traders' attention this morning isn't focused on the geopolitical environment so much as it is focused on the behavior of the technology stocks.
Will they bounce back from recent selling activity that has carried the likes of Apple (AAPL), Alphabet (GOOG), Facebook (FB), and Microsoft (MSFT) below their 50-day moving averages or will they continue to succumb to profit-taking activity?
Moreover, will the broader market continue to hold its line if the technology stocks end up on the firing line again?
These are the questions that matter more right now, because there are no clear answers forthcoming on the North Korea situation and because valuation concerns continue to hang over the market.
At the moment, Apple, Alphabet, Facebook, and Microsoft are all trading higher in pre-market trading, as are Amazon (AMZN) and Netflix (NFLX). That disposition has helped boost the Nasdaq 100 futures 23 points.
The S&P 500 futures and the Dow Jones Industrial Average futures are up one point and 15 points, respectively, and are both trading modestly above fair value.
The major indices, then, should all be tracking in a northerly direction when the opening bell rings.
Darden Restaurants (DRI) and JPMorgan Chase (JPM) aren't expected to join them in that initial move. The former is down 3.8% after reporting its fiscal first quarter results while the latter is down 0.5% after being downgraded by Deutsche Bank to Hold from Buy.
Separately, it is sounding as if the Graham-Cassidy bill to repeal and replace the Affordable Care Act is going to die on the vine after Senator Susan Collins from Maine said she would not vote for it, thereby killing the GOP's chances to secure 50 votes for its passage before the end of the month.
We're not sure the market was ever entirely sold on the prospect of the bill passing, yet its seeming demise will refocus the market's attention on tax reform efforts and the "Big Six" plan that is slated to be announced tomorrow.
What the market is unsure of is whether that plan will be specific and whether it will indicate how tax cuts are going to get paid for without increasing the deficit. In other words, the market continues to hold its applause for the tax reform effort.
Finally, today will feature a number of economic reports, highlighted by the New Home Sales report for August (Briefing.com consensus 577,000; prior 571,000) and the Consumer Confidence report for September (Briefing.com consensus 119.4; prior 122.9) at 10:00 a.m. ET, as well as a number of Fed speakers, including Fed Chair Yellen who will be addressing the NABE at 12:45 p.m. ET with a speech entitled "Inflation, Uncertainty, and Monetary Policy."
Ms. Yellen's speech isn't expected to contain any policy bombshells considering she just opined last week about the Fed's thought process at the September FOMC meeting.