The stock market trudged its way through an uneventful session on Monday and eked out a small gain. This morning, however, the stock market has a little more bounce in its step.
The S&P futures are up six points, the Nasdaq 100 futures are up 28 points, and the Dow Jones Industrial Average futures are up 59 points. Those gains leave them all trading at least 0.3% above fair value, so there should be some broad-based buying interest at the start of trading.
There hasn't been a specific catalyst driving the positive bias, although we suspect many sources will pin it on some optimism about tax reform efforts to which we can justifiably say, "blah, blah, blah."
Every advance needs a headline supporting it, right? Well, that's a headline that works.
We think market participants are simply cheered by the fact that there isn't any prevailing sense of negativity in the news this morning; hence, they see an opening to try their hand at buying the dip that has dented the major indices in recent weeks.
A positive showing from European bourses has helped set the rebound tone. Strikingly, major averages in Germany, France, and the UK are all up between 0.6% and 0.8% even though the ZEW Economic Sentiment reports for the eurozone and Germany for August were both much weaker than expected and well below the prior month's readings.
The supportive takeaway for traders there is that weak data fuels the notion that the ECB will be reluctant to take its foot off the easing pedal. The euro has traded in kind with that assumption and is down 0.6% against the dollar at 1.1758.
The disconnect is that sovereign bonds in the eurozone are also trading lower, meaning their yields are up -- generally between one and three basis points.
The same holds true in the Treasury market where the yield on the 10-yr note is up three basis points to 2.21%.
What this suggests is that there is a lightening of the risk aversion trade that drove yields down as global stock markets sank. On a related note, the CBOE Volatility Index has dipped 4.6% to 12.59 in early trade.
The lone economic release of note today is the FHFA House Price Index for June. It will be released at 9:00 a.m. ET.
There has been a smattering of earnings reports, with Medtronic (MDT), Toll Brothers (TOL), and DSW (DSW) among the luminaries reporting. Those companies all beat estimates, but only DSW is trading higher in pre-market action.
Collectively, the earnings reports aren't market moving. The market is moving in the direction it is, because that is simply the way traders feel inclined to move it at the moment.