The worst week in two years for the stock market was followed by the best week in five years for the stock market. What will this week bring? That remains to be seen, yet today's open is expected to bring out some sellers.
Currently, the S&P 500 futures are down 17 points and are trading 0.5% below fair value. The Nasdaq 100 futures are down 39 points and the Dow Jones Industrial Average futures are down 176 points.
Dow component Walmart (WMT) is garnering some blame for the negative disposition. It is down 7.8% in pre-market trading.
The world's largest retailer fell short of fourth quarter earnings expectations and failed to impress with its fiscal 2019 earnings per share outlook of $4.75-$5.00, the high end of which is below analysts' average expectation.
Concerns about trade protectionism are also factoring into the early selling mix. On Friday the Department of Commerce recommended tariffs on imports of steel and aluminum. Press reports this morning have highlighted the possibility of China and Europe retaliating.
Aside from that, market participants might be feeling a little trepidatious ahead of this week's Treasury auctions. There is a $28 billion 2-yr note auction today at 1:00 P.M. ET followed by a $35 billion 5-yr note auction tomorrow, and a $29 billion 7-yr note auction on Thursday.
That's $92 billion of new supply that the Treasury market will have to digest this week, and the thought of it looks to be weighing on the Treasury market where losses are being registered across the curve. The yield on the 2-yr note is up three basis points to 2.22% while the yield on the 10-yr note has jumped two basis points to 2.90%.
Rising rates (or the fear of them anyway) will be a thematic focus, not only because of the supply factor, but also because of the "Fed factor." The minutes from the January FOMC meeting will be released tomorrow, yet several Fed officials have already made it known that they see a path to further gradual rate increases despite the recent volatility in the stock market.
On a related note, we suspect the negative disposition this morning also reflects a sense that the stock market is going to be reined in some after last week's rebound effort.
The stage, then, looks set for the initial move this week to be to the downside, although the market is not bereft of favorable news.
Home Depot (HD) is up 2.9% after reporting better than expected fourth quarter results; and there is some M&A buzz in today's headline mix.
Privately-held Albertson's is going to acquire the remaining portion of Rite Aid (RAD) that isn't being acquired by Walgreens Boots Alliance (WBA); and Qualcomm (QCOM), in what some think is a snub of Broadcom (AVGO), has raised its offer to acquire NXP Semiconductors (NXPI) to $127.50 per share from $110.00 per share.