Brace yourself. If the behavior of the futures market is any indication, we could be in store for another roller-coaster week of trading action.
Currently, the S&P futures are down two points and are trading in-line with fair value. That's a stark improvement from overnight when they were down 25 points and trading 0.9% below fair value. The Nasdaq 100 futures, down as many as 68 points, are now down six points, and the Dow Jones Industrial Average futures, down as many as 270 points, are now down 21 points.
The weakness overnight wasn't as inexplicable as the rebound effort has been. There were several headline catalysts contributing to last week's negative tone:
- China reported weaker than expected export growth (+5.4% year-over-year) and import growth (+3.0% year-over-year) for November that fed into the market's growth concerns.
- According to Reuters, China's Vice Foreign Minister urged Canada to release Huawei Technologies CFO, Meng Wanzhou, immediately or it will have to accept "full responsibility for the serious consequences caused."
- U.S. Trade Representative Robert Lighthizer, who is leading trade negotiations with China, told CBS that he sees the 90-day window with China as a hard deadline and that the tariff rate on a $200 billion tranche of Chinese goods will be raised to 25% from 10% if no deal is struck.
Trade matters will continue to hang over this market, as will growth concerns. It may have set in, however, that the negative catalysts discussed above have a recycled feel to them. Hence, they were whitewashed as a basis to drive some buy-the-dip action that has the cash market on course for a mixed open.
We'd be careful about reading too much into any move in pre-market trading. The more determinate action lays ahead and what everyone is waiting to see is how this market responds to last week's sell-off.
Will it give way to a successful buy-the-dip effort or will it renew an inclination to sell into any signs of strength?
It's a market that is ready to be led in either direction, which means it can easily be swayed by headline volatility. It will be one day at a time, because what you get one day may not be what you get the next.
On a similar note, we're supposed to get a vote in Parliament on the UK's Brexit plan on Tuesday, yet reports this morning suggest Prime Minster May might announce today a delay in that vote, knowing that it may not go her way.
Ms. May is scheduled to address the House of Commons at 10:30 a.m. ET. Her address will follow shortly after the JOLTS - Job Openings Report for October at 10:00 a.m. ET, which is the only piece of data due out today.
The latter isn't expected to move the market, which is moving on forces right now that aren't so easy to pinpoint.
(Note: comment has been edited to show expectation for a mixed open, not a slightly higher open as indicated in the original comment)