In a familiar sight, the Nasdaq Composite outperformed the S&P 500 on Thursday. In a not-so-familiar sight, though, the S&P 500 financial sector outperformed the S&P 500 information technology sector. It was a key development that helped the S&P 500 hold its place near a record high as former FBI Director Comey's testimony unfolded before the Senate Intelligence Committee.
The testimony itself was dramatic, but ultimately, it didn't produce any high drama for the stock market, which seemed content to think that it didn't offer an indisputable obstruction of justice case against the president.
Our summation of trading matters pointed to the 3.0%+ gain in the S&P 500 since May 17, when the S&P 500 dropped 1.8% after The New York Times article raised allegations the president might have obstructed justice, as a pretty good indicator that the stock market had been sensing it would reach the conclusion it reached after hearing the testimony.
Things could still change knowing the special counsel is conducting his investigation, but on Thursday, the stock market managed to take what it heard in stride.
It is doing the same this morning despite hearing the UK election produced a surprise. Currently, the S&P futures are up three points and are trading 0.2% above fair value.
That indication has followed in the wake of reports that the Conservative Party in the UK failed to secure a majority in the snap parliamentary election called in April by Prime Minster May. The party needed 326 seats to secure that majority, but reports suggest they totaled only 318 seats, which in political terms translates into a hung Parliament.
The British pound has dropped noticeably following the election result, with traders keying on the likelihood of increased political uncertainty and the extra challenges the lack of an outright majority might pose for Brexit negotiations. Not surprisingly, there have also been calls for Ms. May to resign her position as party leader.
Strikingly, the FTSE 100 is up 0.5%, having shaken off the political drama for the time being and rooting itself in the weakness of the pound as a positive element for export competitiveness and the earnings prospects of multinational companies.
There is going to be more to the British election story in the days ahead, but overall, global markets are dismissing it this morning as being predominately a British story.
In other developments, China's inflation reports for May were a mixed bag. Producer prices were up 5.5% year-over-year, which was a deceleration from the 6.4% growth rate seen in April, while consumer prices increased 1.5% year-over-year versus 1.2% in April. The consumer price report was in-line with expectations.
There isn't much news of market-moving note out of the corporate sector, yet there are some headlines that will draw some increased attention.
Specifically, a few analysts have raised their price targets for NVIDIA (NVDA), Ford (F) is reportedly offering buyout packages for 15,000 workers, Hudson's Bay (HBAYF), the owner of Saks Fifth Avenue, announced 2,000 job cuts after reporting its latest quarterly results, and Digital Realty (DLR) and DuPont Fabros (DFT) are tying up in an all-stock deal with an enterprise value of approximately $7.6 billion.
Oil prices are little changed at the moment and the 10-yr Treasury yield has drifted up to 2.21% on modest selling interest. The latter move nonetheless could remain an appealing directional driver for the financial sector, which importantly has emerged this month as a relative strength standout.