The futures for the major indices are trading higher. They aren't up by a huge amount; nevertheless, they are up, supported by a quiet resolve that this bull market isn't done yet.
That resolve was fortified by yesterday's rebound from large losses at the start of trading and it has been reinforced today by several news items having a positive orientation for the economic growth and earnings growth outlook:
- Delta Airlines (DAL) topped fiscal fourth quarter results and raised its FY18 guidance, citing the benefits of tax reform and a robust demand environment
- KB Home (KBH) topped fiscal fourth quarter expectations and expects conditions to remain favorable in most of its served markets
- Walmart (WMT) announced plans to increase its starting wage rate for hourly associates in the U.S. to $11.00 and to provide a one-time cash bonus for eligible associates of up to $1,000
- Waste Management (WM), citing its tax benefit, will distribute $2,000 in 2018 to every North American employee not on a bonus or sales incentive plan (~34,000 employees)
In the background, there is some nervous chatter about trade protectionism and stock market sentiment running at bullish extremes (a contrarian indicator), yet none of it has succeeded thus far in catalyzing any meaningful selling interest.
This morning's economic data hasn't either. The S&P futures are up three points, the Nasdaq 100 futures are up eight points, and the Dow Jones Industrial Average futures are up 18 points.
Initial claims for the week ending January 6 increased by 11,000 to 261,000 (Briefing.com consensus 248,000) while continuing claims for the week ending December 30 decreased by 35,000 to 1.867 million.
Initial claims have picked up the last few weeks, yet the streak below 300,000 has stretched to 149 straight weeks, serving as a reminder that labor market conditions continue to be favorable.
The Producer Price Index for December, meanwhile, was weaker than expected. The index for final demand declined 0.1% (Briefing.com consensus +0.2%) while the index for final demand, excluding food and energy, also declined 0.1% (Briefing.com consensus +0.2%).
On a year-over-year basis, the index for final demand was up 2.6%, versus a 1.7% rise in 2016 and a 3.1% increase seen in November. Core PPI was up 2.3% versus a 2.4% increase in November.
The key takeaway from the report is that there was a deceleration in the Producer Price Index, which will temper concerns about potential pass-through effects to the consumer and perhaps quell some of the budding inflation concerns that have contributed to some of the weakness in longer-dated Treasury securities to begin the year.
The latter view notwithstanding, there hasn't been a rally at the back end of the Treasury yield curve in the wake of this morning's data. The 10-yr note yield is actually up one basis point to 2.56%, which is also interesting considering China talked down yesterday's Bloomberg News report that Chinese officials might be considering slowing, or halting, Treasury purchases.
The lack of a relief rally at the back end could reflect some lingering angst about a possible asset allocation shift into the stock market, which has started the year with a new level of enthusiasm as investors have shown a willingness to take on more risk.