The stock market had a down day on Thursday, which has been an exception in 2019, and it appears headed for a down open today. The S&P futures are down 13 points and are trading 0.5% below fair value. The Nasdaq 100 futures and Dow Jones Industrial Average futures, meanwhile, are trading 0.8% and 0.5% below fair value, respectively.
In many respects, we're seeing a replay of Thursday's narrative, which emphasized concerns about growth, trade matters, and disappointing earnings guidance as the basis for the selling interest.
The main point of emphasis both yesterday and today, though, is that the stock market was overdue for a pullback given the extent to which it had run.
To wit, the S&P 500 had gained as much as 16.5% from the December 24 low; the Nasdaq Composite had gained as much as 19.7%; the Dow Jones Industrial Average had gained as much as 16.7%; the S&P Midcap 400 Index had gained as much as 19.2%; and the Russell 2000 had gained as much as 20.3%.
Straight-line rallies are a wonderful sight to behold for anyone who is not short the market, yet they are inherently subject to interruption at some point and there was the most convenient point of all hanging out there for traders: the 200-day moving average for the S&P 500.
This is a technical point (and we don't want to get too technical), yet it strikes us as little coincidence that the concerns being highlighted now as a basis for the setback were out there for everyone to contemplate between December 24 and February 5 when the market was rallying.
When the market approaches a key technical level, though, it has a way of second-guessing the prevailing trend that got it to where it was in a test of either a key technical support, or resistance, level.
In this case, were talking about key technical resistance -- and it is difficult to blow right through it when there are fundamental issues, like downward earnings revisions and weakening economic growth, running interference and calling into question just how much one is willing to pay for every dollar of earnings.
Like any other day, there will always be individual winners and losers of note. Toy makers Hasbro (HAS) and Mattel (MAT) are a case in point. HAS is down 2.5% after missing earnings estimates by a wide margin and MAT is up 17% after topping some depressed expectations and offering an encouraging FY19 view.
Still, they aren't making much of a difference in a broad sense.
What's making a difference this morning, in a broad sense, are the reports suggesting the U.S. and EU might now be headed for a fallout of sorts in terms of their trade truce. That, combined with misgivings about the U.S. striking a trade deal with China by March 1, have created an interruption in buying efforts.
It's possible things get turned around today, but the turn down yesterday, and the one expected at today's open, is par for the challenge of the stock market's technical course after a huge move.