The futures market has had its share of excitement already today, rolling over sharply close to 7:00 a.m. ET on no specific catalyst of note. We suppose it shouldn't be surprising given the thin trading conditions that are in place today, yet it's a negative for investor sentiment nonetheless that the market still seems to have an itchy trigger finger on the sell button.
The current indication points to a lower start for the major indices, following on the heels of an awful week last week that compounded what had already been an awful month.
Entering today, which will involve an early close at 1:00 p.m. ET, the S&P 500 is down 12.5% in December. The Dow Jones Industrial Average is down 12.1%; the Nasdaq Composite is down 13.6%; and the Russell 2000 is down 15.7%.
It's still possible to see a "Santa Claus rally" (a period covering the last five trading days of the year and the first two of the new year that has had a history of producing some nice gains), but given the tenor of things this month, it would come off more as a shopping-mall Santa Claus rally, which is to say there will be plenty of doubt that it's the real thing.
At the moment, Santa is stuck in the chimney. The S&P futures are down 11 points and are trading 0.7% below fair value.
That's a far cry from overnight when they were up as many as 19 points.
We're trying not to read too much into things given the thin conditions that can lead to whipsaw trading action, yet we have to confess that we were surprised there was an upside bias at all given some of the weekend headlines.
As expected, Congress did not work out a deal on funding for a border wall and the end result is that a partial government shutdown has now gone into effect and could extend past the seating of the new Congress January 3, according to the Washington Post, citing remarks from acting White House Chief of Staff Mulvaney.
What was not expected was the announcement from Treasury Secretary Mnuchin that he held a call with CEOs of the nation's six largest banks to discuss their liquidity positions.
While they confirmed that they had ample liquidity to make loans and conduct normal market operations, it was a confirmation that created some unease given the timing of the call and the added declaration from the Treasury Secretary that he is convening a meeting of the President's Working Group on financial markets, which includes the Federal Reserve's Board of Governors among other parties.
Separately, Mr. Mnuchin had a busy weekend, having also worked to deny a report by Bloomberg News that suggested President Trump had discussed firing Fed Chair Powell.
In brief, the stock market can be forgiven if it's not in the Christmas spirit at the moment. There are a lot of distractions that are out of the ordinary at this time of year, which are feeding a heightened sense of uncertainty that has led to broad-based de-risking and a general buyers' strike.
We can't put a turnaround around past the market today, though, or the next few days, knowing that the sense of negativity is increasing rapidly, which could feed into a contrarian-minded rally.
Even so, there is a lot of repair work that needs to be done to turn the tide of sentiment going into 2019.