When you receive mixed messages, it is difficult to determine how much conviction you should have in doing any one thing. That is the market's dilemma this morning, as it is sorting through the aftermath of yesterday's confusing line of communication on investment restrictions in U.S. companies that provide industrially significant technology.
First, The Wall Street Journal reported that the Treasury Department is pursuing the possibility of restricting companies with at least 25% ownership by a Chinese company from investing in U.S. companies that provide industrially significant technology.
Subsequent to that report, Treasury Secretary Mnuchin tweeted that the aforementioned report was not right. He added that he was speaking on behalf of the president when he said that a statement will be out that isn't specific to China, but to all countries (emphasis our own) that are trying to steal U.S. technology.
Then, Peter Navarro, National Trade Director, told CNBC in an interview before the market closed that there are no plans for restrictions on any countries and that the market's reaction to such reports on Monday was an overreaction.
Navarro's remarks triggered a late-day bounce that helped the S&P 500 eke out a close just above its 50-day moving average (2716.83), yet they didn't foster a total turnaround.
The reason being is that they left the market feeling confused about the policy message -- and that confusion sapped investors' conviction in the rebound trade.
Arguably, the inability to reclaim all that was lost after a top trade official debunked the reported catalyst for Monday's sell-off underscored that Monday's selling wasn't just about trade concerns.
The same can be said this morning, as there is little conviction in the futures market.
Currently, the S&P futures are up two points and are trading 0.2% above fair value while the Nasdaq 100 futures are up 14 points and the Dow Jones Industrial Average futures are down one point.
Things could look better by the closing bell, but for now, the market doesn't look ready to jump just because it was told by an administration official that it should not have fallen like it did.
Instead, the market has an air of reserve about it still, underscoring perhaps an appreciation for the thought that yesterday's selling was driven as much by a desire to take some money off the table (and reduce risk exposure in crowded trades) at the end of the quarter as it was by the contentious-sounding trade headlines.
It will have some other items to dwell on today, namely the better than expected earnings report from homebuilder Lennar Corp. (LEN) and General Electric's (GE) announcement that it plans to spin off its health care business and exit its stake in Baker Hughes (BHGE) over the next two to three years.
GE's decision was forged out of a strategic review process that will leave the company focusing on its aviation, power, and renewable energy businesses. Shares of GE, which begin trading today for the first time in 111 years not being a component of the Dow Jones Industrial Average, are up 6.1% in pre-market action.
Separately, the Conference Board's Consumer Confidence Report for June (Briefing.com consensus 127.1; Prior 128.0) will be released at 10:00 a.m. ET.
Consumer confidence should be relatively high, notwithstanding investor confidence this morning that is relatively mixed.