The word is out that Senate Majority Leader McConnell has canceled the vote on the GOP bill to replace Obamacare after it became clear he wouldn't have the votes. Instead, the Senate will pursue a plan to hold a vote on simply repealing Obamacare with a two-year delay to figure out a new replacement plan.
This political development, along with some modest selling interest in Bank of America (BAC) and Goldman Sachs (GS) after they each reported better than expected earnings, has hung like a wet blanket this morning over the market.
Currently, the S&P futures are down six points and are trading 0.2% below fair value while the Nasdaq 100 futures are down 21 points and are trading 0.1% below fair value.
The earnings reporting standout thus far has been Netflix (NFLX). It reported after Monday's close, missing earnings expectations slightly but overwhelming investors with 5.2 million net customer additions that blew past estimates. Shares of NFLX are up nearly 10% in pre-market trading and have cast an appealing line for investors fishing for growth stocks.
Conversely, Harley-Davidson (HOG) is down close to 9% in pre-market action after the motorcycle company slashed its 2017 shipment guidance. Harley-Davidson's problems, though, seem to be more company/industry-specific, so it is serving as an interesting story stock as opposed to an actual market mover.
Johnson & Johnson (JNJ) is a blue-chip luminary that posted better than expected results and raised its fiscal 2017 guidance. Its stock is up 0.9% and will be a source of support for the Dow Jones Industrial Average.
It is somewhat striking that the futures market isn't lower than it is after the latest legislative snafu in Washington. It suggests most likely that market participants felt the Senate GOP's bill to replace Obamacare at this point was fated to meet the fate it did.
Be that as it may, it doesn't instill unbridled confidence in the idea that a tax reform plan is going to sail smoothly through Congress. We shall see, but all in all, the fallout from the Washington dysfunction, as one well-placed bank CEO recently put it, has been held in check.
Good earnings news overall has provided a very important offset, as it suggests corporate America is managing fine as it is without any newfangled fiscal stimulus.
The limiting factor is that many stocks are sporting premium valuations that are based in part on the notion that they will achieve even stronger growth from a tax reform plan. Accordingly, the next leg higher will be harder to come by with the prospect of tax reform remaining uncertain.
Separately, the Import and Export Price Indexes showed import prices and exports prices both declined 0.2% in June. Excluding fuel, import prices were up 0.1%. Excluding agriculture, export prices were flat.
On a year-over-year basis, nonfuel import prices are up 1.0% versus down 1.8% for the 12-months ending June 2016, while nonagricultural export prices are up 1.1% versus down 3.8% for the 12-months ending June 2016.
This report isn't changing the narrative on low inflation readings. That understanding, and the jittery feel for the stock market open, have the 10-yr yield down three basis points at 2.28%.