There are many more trading days ahead before it can be determined if the stock market suffered a June swoon. In terms of this trading day, it appears as if there will be some form of swooning when the opening bell rings.
Currently, the S&P futures are down three points and are trading 0.1% below fair value. The Nasdaq 100 futures are down 21 points and are trading 0.3% below fair value. The Dow Jones Industrial Average futures are down 35 points and are trading 0.2% below fair value.
The story lines may be different, yet they remain the same when it comes to dissuading buyers from showing much conviction.
- A White Paper out of China points the finger of blame at the U.S. for the breakdown in trade negotiations.
- The Wall Street Journal reports the Dept. of Justice is close to launching an antitrust investigation of Google (GOOG), which is down 3.4% in pre-market trading.
- Dow component Boeing (BA) is down 1.4% in pre-market action following reports of improperly manufactured parts on more than 100 737 model planes.
- Manufacturing PMI data for May out of the eurozone was roundly disappointing and generally weak, with several sub-50 readings (50.0 is dividing line between expansion and contraction).
- Treasuries continue to rally on safe-haven buying interest. The yield on the 2-yr note is down six basis points to 1.88% while the yield on the 10-yr note is down three basis points to 2.11%.
If the stock market has anything going for it as it begins the month of June, it could be the burgeoning sense that investor pessimism is rising and that the market is appearing oversold on a short-term basis.
Those factors are probably limiting some of the fallout in the futures market, as there may be an abiding sense that buyers are going to step in after the opening dip. Should that be the case, the real focal point will be whether any buy-the-dip interest can be sustained.
The semiconductor industry will be a good gauge of trading matters. It is in the crosshairs of the U.S.-China trade dispute. The Philadelphia Semiconductor Index plummeted 16.7% in May, which makes it ripe for some buy-the-dip action if sentiment turns.
At the same time, there is a positive catalyst for the industry today in the form of an M&A deal. German company Infineon is buying Cypress Semiconductor (CY) for approximately $10 billion, or $23.25 per share, in cash. Importantly, the offer represents a robust 46% premium to the unaffected 30-day volume-weighted average price seen before the possibility of a deal was communicated in the media.
That premium could ignite a belief that recent selling pressure has created some attractive long-term investment opportunities in the space, which will be a key spot to watch today.
Other key items to watch include the ISM Manufacturing Index for May (Briefing.com consensus 52.6; Prior 52.8) at 10:00 a.m. ET today, headlines out of the American Society of Clinical Oncology Conference, remarks from President Trump during his three-day state visit to the UK, and the May employment report at the end of what should be an interesting week to begin a long month.