Monday marked the start of spring and the stock market traded in a way that resembled the Upper Midwest this time of year, which is to say it didn't feel all that springy. Political uncertainty left a notable chill in the air that offset the preconception of warmer times ahead.
Things look a little less chilly this morning, though. The S&P futures are up four points and are trading 0.2% above fair value.
There isn't much corporate news to account for the positive disposition. Homebuilder Lennar Corp. (LEN) and food company General Mills (GIS) reported quarterly earnings results that were ahead of analysts' average expectations, yet neither stock is trading higher in pre-market action.
We can check them off the list, then, as catalysts for the upside bias.
The effective driver this morning, we believe, is the weaker dollar, which stems from a relaxation of risk-off sentiment following the French presidential debate.
News reports have pointed to polls that suggest centrist candidate Macron was thought to have won the debate, tempering concerns for the time being about Marine Le Pen, leader of the far right Front National Party, winning the debate and boosting her chances of winning the presidential election.
Sentiment on this particular manner can change quickly, yet the evidence of the risk-on takeaway stemming from the debate can be seen in the strength of the euro (+0.6% to 1.08 against the dollar), the modest gains in European equity markets, including a 0.4% gain for France's CAC 40, and a pullback in sovereign bonds.
The weakness in the greenback has helped prop up oil prices ($48.42, +$0.20, +0.4%) and has manifested itself in a 0.5% decline in the U.S. Dollar Index to 99.89. There was practically no reaction to the report that the Q4 Current Account Deficit declined by $3.6 billion from the third quarter to $112.4 billion (Briefing.com consensus $128.2 bln).
Separately, the dollar has also gotten pinched by the latest inflation data out of the UK, which showed a stronger-than-expected 2.3% year-over-year increase in February CPI (prior +1.8%) and a 2.0% increase in core CPI (prior +1.6%).
Those consumer inflation prints have contributed to the thought that the Bank of England could soon go the way of the Federal Reserve and start tightening its monetary policy soon. Accordingly, the British pound is up 1.0% against the dollar today at 1.2459.
Risk-on sentiment, however, isn't full bore by any means. That's understandable given the panoply of Fed speakers today, the reports that the U.S. is considering broader sanctions against North Korea that could potentially stifle the activity of Chinese banks, and the ongoing debate on Capitol Hill over the House GOP's health care reform plan.
The latter reportedly included some revisions last night, yet media reports continue to suggest that passage of the plan can't be regarded as a done deal.
All in all, a market that was a little weaker yesterday is looking a little stronger this morning. It's the back-and-forth action that has dominated the past few weeks.