Yesterday's session was a dicey one, but with the late run that helped the S&P 500 close above its 200-day moving average (2776), market participants are rolling the dice this morning, expecting the rebound try to persist.
Currently, the S&P futures are up nine points and are trading 0.2% above fair value. The Nasdaq 100 futures are up 26 points and are trading 0.3% above fair value. The Dow Jones Industrial Average futures are up 48 points and are trading 0.1% above fair value.
Nothing improved on the trade deal front to foster the positive bias. If anything, it could be said things worsened based on a Bloomberg report that indicates China has put soybean purchases from the U.S. on hold.
The improved tone, then, is being driven predominately by a sense that the stock market seems primed to bounce from a short-term oversold condition.
Entering today's trade, the S&P 500 is down 5.5% this month. All 11 sectors are down for the month, with losses ranging from 0.5% (real estate) to 9.2% (energy). The Philadelphia Semiconductor Index is down 16.1% and the Dow Jones Transportation Average is down 8.5%.
It has been a bad month -- after four, very good months.
Ironically, there was a sense entering May that the market was short-term overbought. It was likely poised for a pullback anyway. The decision, however, to turn the tariff screws on China after the trade deal didn't come together like U.S. negotiators expected it to come together catalyzed the selling as participants had to rethink prior assumptions about economic and earnings growth potential.
A trade deal could eventually be struck, yet neither the U.S. nor China is throwing off rhetorical vibes right now to suggest a deal will be coming together soon. Accordingly, some of the excess of trade deal optimism priced in during the first four months of the year has been wrung out this month.
In turn, some burgeoning pessimism about a slower global growth outlook, which includes the U.S., has been priced into the Treasury market.
Yields there have come up just a bit today on the countervailing sense that Treasuries are short-term overbought. To wit, the yield on the 10-yr note was down as many as 29 basis points in May at yesterday's low yield of 2.21%. Currently, the yield on the 10-yr note is 2.25%.
This morning's data hasn't altered the course of things, which is understandable since it was largely in-line with expectations.
The second estimate for Q1 GDP showed a slight downward revision to 3.1% (Briefing.com consensus 3.1%). The GDP Price Deflator was revised to 0.8% (Briefing.com consensus 0.9%) from 0.9%.
Initial claims for the week ending May 25 increased by 3,000 to 215,000 (Briefing.com consensus 217,000) while continuing claims for the week ending May 18 decreased by 26,000 to 1.657 million.
Finally, the advance international trade in goods deficit for April widened to $72.1 billion (Briefing.com consensus -$72.0 billion) from $71.9 billion in March. Exports were $5.9 billion less than March exports while imports were $5.6 billion less than March imports.
Pending home sales for April (Briefing.com consensus +1.0%; Prior +3.8%) will be released at 10:00 a.m. ET.
For now, what's pending is a positive open for the stock market after a negative month dominated by a sense that a trade deal with China could be pending for some time.