The stock market looks poised to stumble a bit at the open, as it attempts to make a run at three up days in a row. Currently, the S&P futures are down three points and are trading 0.1% below fair value. The Nasdaq 100 futures are down seven points and the Dow Jones Industrial Average futures are down 13 points.
There are some headline catalysts that could be driving the futures market higher:
- China reported better than expected trade data for April, highlighted by a 12.9% year-over-year increase in exports and a 21.5% year-over-year increase in imports
- Comcast (CMCSA) is reportedly planning a cash bid for the entertainment assets of 21st Century Fox (FOXA) in an attempt to upend Disney's (DIS) pursuit of those assets, but will hold back on any offer until it knows what happens with the AT&T (T)-Time Warner (TWX) merger ruling.
- Shire plc (SHPG) agreed to a $62 billion takeover offer from Takeda Pharma (TKPYY); and
- ValueAct has taken a $1.2 billion stake in Citigroup (C)
Still, buyers are holding back this morning. The ostensible reason for their hesitation is today's impending announcement by President Trump regarding the Iran nuclear deal.
That announcement is slated to happen at 2:00 p.m. ET and it is widely thought that the president will indicate the U.S. is pulling out of that deal. Whether that means he will re-impose economic sanctions on Iran immediately remains to be seen and is the crux of today's guarded stance.
It will be a busy day for the president, who tweeted earlier that he will also be having a call with China's President, Xi Jinping, to discuss trade and North Korea.
Oil prices, which have been running higher on the thought that Iran's oil supply will be curtailed if the U.S. pulls out of the deal, have retraced a small portion of their move in what is being thought of as a "buy the rumor, sell the news" trade.
Nevertheless, oil prices ($70.03, -$0.70) are holding above $70.00 per barrel, which is fostering marginal concerns about rising gas prices for consumers and rising input costs for businesses that could stand in the way of spending and earnings growth.
That type of forward-thinking mindset, which is oriented around what could go wrong, has been a contributing factor to why the stock market has had such a lackluster response to the great first quarter earnings reporting period.
Worries about rising interest rates, though, are acting as the main headwind. Fed Chairman Powell said in an overnight speech that markets should not be surprised by the central bank's action if economic growth remains on track. That action entails the likelihood of at least three rate hikes this year, based on the dot-plot shared at the March FOMC meeting.
On a related note, the U.S. Dollar Index (93.08, +0.33) is up 0.4% this morning, continuing what has been an impressive run since mid-April.
The outlook for rising interest rates -- and increased debt issuance -- has been pronounced at the front end of the Treasury yield curve. The yield on the 2-yr note currently stands at 2.51% versus 1.26% last September and 1.91% at the start of the year.
There will be a $31 billion 3-yr note auction today, with results announced at 1:00 p.m. ET. The current yield on the 3-yr note is 2.64%.
The current position of the S&P 500, meanwhile, is the same as it was at the start of the year, meaning it has gone everywhere and nowhere in 2018 on the back of an anxious investor base.