Monday was a good day for the stock market. Tuesday was not. Today has a long way to go, but at the moment, this hump day is leaning more in favor of Monday than Tuesday.
The S&P futures are up eight points and are trading 0.3% above fair value. That will translate to a positive start for the cash market -- a start that could be even better if not for the projected decline of 5.5% in shares of Dow component IBM (IBM), which are dropping after the company reeled off a less-than-impressive March quarter that included the 20th straight quarter of a year-over-year decline in revenue.
The fortunate offset for the broader market is that Morgan Stanley (MS) reported better-than-expected first quarter results that made Goldman Sachs's (GS) disappointing results on Tuesday look like a company-specific issue.
Shares of MS are indicated 2.4% higher in pre-market trading, which will give a much needed lift to the heavily-weighted financial sector.
The latter slipped 0.8% on Tuesday and pulled the broader market down with it. That left the sector down 2.9% month-to-date and 0.8% year-to-date. It also left the sector in the spotlight as a reflection of the waning interest in the so-called reflation trade.
Accordingly, look for the manner in which the financial sector trades to help dictate the course of things for the broader market, which has deviated from its post-election rally course since the start of March. In the intervening period, the S&P 500 has declined 2.2% while the S&P 500 financial sector has declined 8.3%.
Some of that lost ground will be made up at the start of today's trading. That will be an offshoot of the expected gains for the financial sector, as well as a sense of relief that today's batch of macro headlines hasn't produced any new sense of deepening negativity.
The French presidential election, North Korea, tax reform -- everything is still up in the air on those fronts, yet the market's sense of tolerance for those uncertainties has been dialed back a notch for the time being.
That doesn't assure the same will hold true this time tomorrow -- or maybe even later today -- but for the moment, market participants are trading what they see directly in front of them.
To that end, they see Morgan Stanley and the financials recovering; they see major European markets, including France's CAC 40 (+0.3%), sporting a positive bias; they see the Treasury market returning some of Tuesday's big gains; and they see some of the risk-averse mindset softening with the drop in gold prices ($1285.70, -$8.40, -0.7%).
Faith in the durability of any rebound effort won't be stoked, though, until the S&P 500 can reclaim a posture above its 50-day simple moving average (currently 2355.16) on a closing basis. Until then, no rally effort can be taken for granted, as Tuesday's reversal indicated.