Yesterday's column concluded with an observation that the opening indication was a tentative one and that market participants would be watching the tape closely to see what was next after Wednesday's bloodletting.
What came next wasn't pretty. The major indices made a half-hearted (more like a quarter-hearted) recovery attempt before rolling over and succumbing to another broad-based sweep of selling interest that drove the S&P 500 below its 200-day moving average and the Nasdaq Composite briefly into correction territory (i.e. a 10% pullback from a prior high).
Like Wednesday, Thursday's session didn't have a major news catalyst acting as its trigger. Rather, it was a trade of attrition driven primarily by the market's disconcerting technical posture and an ongoing push to de-risk as it became apparent former leaders still weren't ready to lead again.
The de-risking posture was transparent in the understanding that long-term rates moved down noticeably on Thursday, and yet that served as little comfort for a stock market that had been rattled by the jump in long-term rates and the specter of higher rates to come.
So, that was yesterday. Today is a different story -- at least ahead of the open.
There is nothing tentative about the opening indication. The S&P futures are up 28 points and are trading 1.6% above fair value. The Nasdaq 100 futures are up 105 points and are trading 2.3% above fair value. The Dow Jones industrial Average futures are up 224 points and are trading 1.4% above fair value.
What changed? Nothing really, other than the price level of the major indices, which many now think have gotten marked down too much at this juncture and are ripe for a rebound.
Granted there will be some talk about how participants are optimistic President Trump and President Xi might meet at the G-20 meeting to discuss trade issues or that the earnings reports this morning from JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) were the saving grace.
The latter is debatable considering Wells Fargo came up shy of analysts' average earnings estimate while Citigroup came up short of analysts' average revenue estimate. Nevertheless, those stocks are all indicated higher, which probably would have been the case anyway barring a disastrous report, which none of them had.
If you want to get a read on how this market is going to react to earnings this reporting period, we'd argue that it isn't the reaction to the financial stocks that matters most.
What matters more is the reaction to the guidance from the industrials and materials companies, which have wider exposure to the elements that have the market on edge about the earnings growth outlook: currency pressures, tariffs, foreign slowdowns, higher costs, and challenging comparisons.
For now, the market is reacting well. We can't say that it is acting well, though, without the benefit of seeing how the entirety of this trading day plays out.
There wasn't much reaction to the Export-Import Price Index for September, which revealed export prices were flat after declining 0.2% in August and import prices were up 0.5% after being down 0.4% in August.
Excluding agricultural exports, export prices increased 0.2% after declining 0.2% in August. Excluding fuel, import prices were unchanged after declining 0.2% in August. Nonagricultural export prices were up 3.3% year-over-year, versus 2.8% for the 12-months ending September 2017, while nonfuel import prices were up just 0.6% after ending up 1.3% for the 12-months ending September 2017.
The key takeaway from the report is rooted in the understanding that nonfuel import prices are being held in check, which is helpful in terms of easing some of the market's inflation angst.
The 10-yr Treasury yield has improved some after the release. It is currently up three basis points to 3.16% after hitting 3.18% in overnight action.
Another overnight development involved China reporting a record trade surplus with the U.S., which is unlikely to sit well with President Trump. China's exports surged 14.5% in September, presumably on some frontloading before tariffs went into effect, while its imports jumped 14.3%.
China's robust trade activity helped temper some of the global growth concerns and helped clear a path for a rebound effort in foreign markets.
That path has been laid for the U.S. market, which is going to pop at the open. Bear in mind, though, how the stock market opens matters less than how it closes going into the weekend.