The stock market suffered a thumping on Friday as it registered its largest losses since the Brexit vote. That is old news. The "new" news is that it is set to keep sliding this morning.
The S&P futures are down 10 points and are trading 0.6% below fair value. The Nasdaq 100 futures are down 29 points and the Dow Jones Industrial Average futures are down 158 points.
That doesn't sound too good, yet it would be remiss not to mention that the futures are much improved from their worst levels of the morning, which had the S&P 500 futures down 23 points.
Losses on Friday were attributed primarily to a fear of rising interest rates, which triggered valuation concerns. It was more than just that, however.
The response to the earnings reports from heavyweight companies, such as Apple (AAPL) and ExxonMobil (XOM), was disappointing; some political angst was part of the mix that kept buyers sidelined; and the trading trend simply shifted, driving a group-think mentality to sell in the same way there was a group-think mentality in January to chase the gains.
Market rates are acting a little better this morning. The yield on the 10-yr note is down two basis points to 2.83%, yet it is telling that the steady state of the Treasury market (for now) hasn't sparked a prevailing buy-the-dip response.
Investors haven't been swayed either by the better than expected earnings report from Bristol-Myers Squibb (BMY), the news that Oracle (ORCL) authorized an additional $12 billion for its stock repurchase program, or the word from Broadcom (AVGO) that it submitted a "best and final offer" of $82.00 per share in cash and stock to acquire Qualcomm (QCOM) -- a 50% premium over Qualcomm's unaffected stock price on November 2, 2017.
Separately, speculation has picked up again that Archer Daniels Midland (ADM) might be interested in buying Bunge (BG).
Those headlines might have had some stronger buying influence on other days, but not today.
There is a nagging sense that the stock market still has more work to do to cut some of January's speculative excess. Outgoing Fed Chair Janet Yellen stirred that pot with the observation in an exit interview with CBS in which she said, "...it is a source of some concern that asset valuations are so high."
Her successor, Jerome Powell, will be sworn in today.
The change in leadership at the Federal Reserve has been heralded as a transition of continuity; nevertheless, the actions of the Federal Reserve -- or lack thereof -- are going to be a major driver of the capital markets as the year progresses.
On a related note, the Federal Reserve announced after the close on Friday that it is restricting the growth of Wells Fargo (WFC) until the bank demonstrates that it has sufficiently improved its governance and controls. That announcement, and a wave of downgrades by analysts following the bank, has sparked a 7.5% decline in shares of WFC in pre-market trading.
The weakness in WFC will be a weight on the financial sector.
The lone economic release of note today is the ISM Non-Manufacturing PMI for January (Briefing.com consensus 56.7; prior 55.9). That report will be released at 10:00 a.m. ET. It isn't typically a big market mover.
Today's big market mover will be the trading action itself. Can the stock market stage a big reversal after the opening losses and sustain that move or will it succumb to another day of broad-based selling interest? That is the question.