The futures market is up this morning, reportedly cheered by the news that the Department of Commerce has granted a 90-day license that will enable Huawei to service existing networks and mobile services and, at the same time, provide some added flexibility for operators to make other arrangements.
Currently, the S&P futures are up 17 points and are trading 0.7% above fair value. The Nasdaq 100 futures are up 57 points and are trading 0.8% above fair value. The Dow Jones Industrial Average futures are up 160 points and are trading 0.7% above fair value.
This can best be described as a superficial response, because there isn't a lot of substance to this news for a variety of reasons:
- The idea that this temporary license could be forthcoming was talked about yesterday (when the market was selling off).
- It is a temporary reprieve.
- U.S. companies are still banned from doing new business with Huawei, unless they are granted a special license to do so.
This is a band-aid that will stop some of Monday's bleeding for a bit, but it's not a permanent stitch. Traders, though, are running with the news (or maybe algorithms are) and jumping on it in a quick effort to squeeze out short sellers and establish some momentum in a buy-the-dip trade.
In effect, market sentiment is being leased from one day to the next, paced by the headline du jour that "sets the tone" with respect to dealings on trade matters.
That is why the market is looking past the disappointing earnings results and guidance from Kohl's (KSS), the dip in shares of Home Depot (HD) after it reported better-than-expected earnings results, and a caustic research note on Tesla (TSLA) from Morgan Stanley, which is maintaining its $230 price target on the stock but revising its "worst-case" scenario for the stock to $10 from $97.
Boeing (BA), meanwhile, has gotten a boost from a Wall Street Journal report highlighting the view shared by U.S. aviation authorities that the Ethiopian Airlines crash may have been caused by a bird strike. That view remains open for debate, but nonetheless, as a high-priced Dow component, a 1.6% gain in shares of Boeing is helping to move the needle on the Dow futures.
Still, the bulk of the futures move is wrapped up in the trade headline, which can be unwrapped easily if China steps out with some type of retaliatory response to the order that prevents U.S. companies from doing new business with Huawei.
That's not in the news mix at the moment, so there is momentum in a buy-the-dip trade that is resting on some specious headline momentum.