Yesterday, we said investors were generally impassive at the moment. That take on matters has been borne out in the market this week, evidenced by the fact that the S&P 500 is down 0.01% after three days of trading.
There have been twists and turns along the way, yet there hasn't been any conviction in any one direction, as the market has seemingly found its way back to start each session.
Today, the S&P 500 appears poised to start the day close to where it ended yesterday. Currently, the S&P futures are down four points, which leaves them 0.1% (after rounding) below fair value.
The Dow Jones Industrial Average futures are down 17 points and are trading a hair above fair value. The Nasdaq 100 futures, plagued by a 9.8% drop in shares of Booking Holdings (BKNG) after its earnings report, and an 8.3% decline in shares of Celgene (CELG) after a large shareholder of Bristol-Myers (BMY) said it didn't support their proposed merger, are down 21 points and trading 0.3% below fair value.
Box (BOX), Square (SQ), Crocs (CROX), and HP Inc. (HPQ) are other stocks getting hit hard in pre-market action following their earnings reports, with losses ranging from 6% to 22%.
Things could be worse for the broader market when taking into account, too, the news that China's official manufacturing PMI for February fell to a three-year low of 49.2 (a number below 50 denotes contraction) and that President Trump ended his summit with North Korean leader Kim Jong Un earlier than expected, balking at the suggestion to lift all sanctions in exchange for denuclearizing some portions of North Korea. No agreement was signed.
The relatively contained reaction in the futures market to the negative headlines suggests expectations for China's PMI report and the summit were on the low side ahead of both developments -- or perhaps they suggest this market can find ways to placate itself in the face of bad news as long as central banks keep offering good news with a dovish-minded policy approach.
The release of this morning's economic data hasn't altered the course of the futures market much even though it could be heralded as being relatively good.
The Advance Q4 GDP estimate took top billing in this respect, showing economic output increased at an annualized rate of 2.6% (Briefing.com consensus 2.3%). The GDP Deflator increased 1.8% (Briefing.com consensus 1.7%).
With the fourth quarter numbers, it is estimated that real GDP increased 2.9% in 2018 versus 2.2% in 2017. From the fourth quarter of 2017 to the fourth quarter of 2018, though, real GDP increased 3.1%.
The key takeaway from the report is that it supported the notion that the U.S. economy held up relatively well in the fourth quarter despite the stock market volatility. In turn, it will help rebut any notions that the economy is on the cusp of a recession.
Real final sales, which exclude the change in private inventories, were up 2.5% versus a gain of just 1.0% in the third quarter. Personal spending increased 2.8% and accounted for 1.92 percentage points of the change in Q4 real GDP. Net exports were the only drag, subtracting 0.22 percentage points.
Separately, initial claims for the week ending February 23 increased by 8,000 to a still-low 225,000 (Briefing.com consensus 221,000). Continuing claims for the week ending February 16 increased by 79,000 to 1.805 million.
The key takeaway from this report is that the low level of initial claims, which have held below 300,000 for 208 consecutive weeks, continues to support the view that the labor market remains tight and that employers are reluctant to let go of employees.