The broader market has mostly drifted this week on a lack of conviction among buyers and sellers. There will be no drifting action at the start of today's trading, however. The S&P futures are up 18 points and are trading 0.6% above fair value. The Nasdaq 100 futures and Dow Jones Industrial Average futures are trading 0.5% and 0.9% above fair value, respectively.
It hasn't been a perfect storm for the bears, but it has been close as far as sentiment-crushing headlines go. To wit:
- JPMorgan Chase (JPM) reported record revenue and net income for the first quarter, easily topping consensus estimates. It is up 2.8% in pre-market trading.
- Chevron (CVX) announced a $33 billion, or $65.00 per share, cash-and-stock acquisition offer for Anadarko Petroleum (APC), which is a 39% premium over APC's closing price on Thursday. That news has energized a host of other energy stocks.
- China reported a reassuring 14.2% year-over-year increase in exports for March and reported an acceleration in new loan activity, which is fostering hope that the worst of its growth slowdown is behind it, notwithstanding the 7.6% year-over-year decline in imports it reported.
That's a pretty good trifecta to drive a risk-on trading vibe, and that is what we have this morning.
Treasuries are weak across the curve; the U.S. Dollar Index is down 0.4%; and the CBOE Volatility Index is down 4.4%, hitting its lowest level (12.45) since last September -- or right about the time the S&P 500 was setting a new all-time high.
With the current standing of the S&P 500 futures, the cash market should race through 2900 at the opening bell. That will be a source of excitement, yet the primary source of interest for a lot of participants will be if the S&P 500 can close above 2900.
Additionally, participants will be watching to see how JPM, and the financials, hold up today. Aside from JPM, Wells Fargo (WFC) and PNC Financial Services (PNC) also topped consensus EPS estimates; moreover, market rates are headed higher.
The financial sector, then, should have a good day today. If it eventually rolls over, it will be a source of disappointment for the broader market as it will be regarded as a sign that a lot of good news (or hope for good news) has been priced into the market already.
It's fair to say that a lot of good monetary policy news has been priced in already, and the Import-Export Price Indexes for March are unlikely to be seen as extraction points.
Granted the headline figures will command some attention, with import prices up 0.6% month-over-month after increasing an upwardly revised 1.0% in February, and export prices up 0.7% for the second straight month.
The key takeaway from the report, however, is that nonfuel import prices were down 0.8% for the 12 months ending March while non-agricultural export prices were up just 1.0%. In other words, there was no real inflation pressure from a broader standpoint.
The latter report rounded out a week of inflation reports, all of which showed a moderation in core inflation readings on a year-over-year basis and validated the Fed's patient policy stance.