Yesterday's comment began with the recognition that the S&P 500 was 2-for-2 in terms of posting losses this week. After Wednesday's session, we can now say it is 3-for 3. At the moment, there is a budding sense that 4-for-4 is a distinct possibility.
There is a long way to go today, yet the S&P futures aren't reflecting any snap back tendencies. They are currently down a half point and are trading in-line with fair value.
The catalyst for yesterday's retreat and today's lackluster disposition is pretty much one in the same. Enter oil prices, which have dropped below $50.00 per barrel (currently -$0.89, or 1.8%, at $49.39) on selling pressure that has carried over from Wednesday's ugly session, which saw a 5.4% drop in prices on the back of yet another bearish oil inventory report.
The $50 level has been viewed as an important area of technical support, so traders will be watching closely to see if it can be reclaimed by the close.
For the time being, the ongoing weakness in oil prices is registering as a negative for market psychology along with a sense that pro-growth policymaking in Washington might not happen so easily.
This morning's action has also been governed by some added attention to the European Central Bank (ECB) policy meeting.
As expected, the ECB left its policy rates unchanged, and there appears to be a measure of relief in the understanding that the directive reiterated the belief that they are expected "...to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases."
ECB President Draghi is conducting his press conference at the moment. He has played up the view that there are no signs yet of a convincing upward trend in core inflation; however, he also observed that the ECB's GDP outlook has been revised slightly higher for 2017 (+1.8%) and 2018 (+1.7%) since the December meeting and that there are signs of a global recovery and increasing global trade.
Risks, he said, are less pronounced, but remain tilted to the downside due predominately to global factors.
In effect, it sounds like Mr. Draghi is walking a fine policy line waiting on the election results in France before communicating any meaningful shift in monetary policy direction, one way or the other.
That understanding has pretty much neutralized the impact of the ECB meeting since the overarching point is that the status quo will be maintained for the time being.
In other developments, the Import and Export Price Indexes for February and the weekly Initial Claims Report didn't upset the market's view that a rate hike from the Fed looks likely at the March meeting.
Initial claims for the week ending March 4 rose by 20,000 to 243,000 (Briefing.com consensus 240,000), leaving them below 300,000 for the 105th straight week, which is to say no sentiment trendlines were broken with this report. Continuing claims for the week ending February 25 fell by 6,000 to 2.058 million.
Import prices increased 0.2% in February, led by a 0.3% jump in nonfuel import prices. Fuel import prices declined 0.7%. On a year-over-year basis, nonfuel import prices are up 0.5% (versus down 2.5% for the 12-month period ending February 2016) while all import prices are up 4.6% (versus down 6.6% for the 12-month period ending February 2016).
Export prices increased 0.3%, driven by a 1.4% gain in agricultural export prices and a 0.3% bump in prices excluding agriculture. On a year-over-year basis, all export prices are up 3.1% (versus down 6.1% for the 12-month period ending February 2016).