There is a negative bias in the futures market this morning that has been linked to several points of concern that have been in the headline mix for some time. That is an important understanding considering the S&P 500 has been up seven straight weeks.
What we're driving at is that the market isn't as anxious about these points of concern as some news sources are making it out to be. The market, in effect, is simply taking some time to digest its gains and Friday's huge move in the Nasdaq (+2.2%) on the back of some big-time earnings reports from some big-time companies.
It's not reorienting itself on account of fear. It's simply situating itself to deal with a little profit taking after an exhausting climb up the wall of worry.
The S&P futures are down six points, the Nasdaq 100 futures are down one point, and the Dow Jones Industrial Average futures are down 62 points.
The stepping stones on that wall of worry have included uncertainty about who the president will nominate to be Fed chairman, uncertainty about special prosecutor Mueller's investigation into Russia's interference with the presidential election, uncertainty about passing tax reform, uncertainty about Catalonia's independence movement, uncertainty about North Korea, uncertainty about the Fed's path of monetary policy, and, ironically, uncertainty about the stock market's ability to keep ignoring bad news.
There's even more to that mix, but with the S&P 500 up 4.9% over the last seven weeks and the Nasdaq Composite up 5.4% over the last seven weeks, there is no mistaking the fact that uncertainty has not been the enemy of this stock market.
Hence, we can't put too much stock in the claims this morning that the market is nervous because President Trump will reportedly announce his nominee for Fed chair this week, or because The New York Times is reporting Paul Manafort, ex-campaign chairman for President Trump, has been told to surrender to authorities, or that North Korea might conduct a nuclear missile test while President Trump is in Asia, or because the GOP is finding it difficult to write tax legislation that will be acceptable to its members.
These excuses might be more legitimate if the market's trading action over the prior seven weeks had legitimized them. Instead, all the trading action did was to minimize them.
We'll see eventually how this week unfolds. To be sure, it will produce a whole lot of important news items, including an updated policy directive from the FOMC on Wednesday, the release of the October employment report on Friday, and of course another long list of earnings reports throughout the week.
There isn't a shortage of news this morning either.
There has been a slate of M&A news, highlighted by homebuilder Lennar's (LEN) acquisition of CalAtlantic (CAA) in a $9.3 billion stock-and-cash deal, Vistra Energy's (VST) move to acquire Dynegy (DYN) in an all-stock transaction, Novartis's (NVS) $3.9 billion bid to buy Advanced Accelerator Applications (AAAP), and the tie-up of Strayer Education (STRA) and Capella Education (CPLA).
Separately, the Personal Income and Spending report for September was released. It showed personal income rising 0.4% (Briefing.com consensus +0.3%), led by a 0.4% increase in wages and salaries, and personal spending increasing 1.0% (Briefing.com consensus +0.8%), led by a 2.1% jump in goods spending. The personal savings rate slipped from 3.6% to 3.1%.
In addition, the report revealed a 0.4% increase in the PCE Price Index and a 0.1% increase in the core PCE Price Index, which excludes food and energy, as expected.
The PCE Price Index is the Fed's preferred inflation gauge. With the September increases, the PCE Price Index is up 1.6% year-over-year, versus up 1.4% for August, while the core PCE Price Index is up 1.3%, unchanged from August.
The key takeaway is that the PCE price data won't trigger any major inflation alarm, yet it also won't be seen as persuading the Fed from raising the fed funds rate at its December meeting.
The stock market may take a little persuading to trade higher today. For now, it is indicated to open modestly lower on news it can use to do some profit taking.