For the second day in a row, the futures market is exhibiting a weak disposition that is raising some eyebrows. Currently, the S&P futures are down six points, the Nasdaq 100 futures are down 15 points, and the Dow Jones Industrial Average futures are down 21 points.
That's not as bad as yesterday, yet the popular attribution for the weakness remains much the same.
Concerns about the ability to pass a tax reform plan are the alleged driver of the selling interest. Those concerns registered yesterday when word leaked that the Senate's tax reform blueprint calls for a cut in the corporate tax rate to 20% to be delayed until 2019.
It would be remiss, however, not to point out that the major indices cut their intraday losses substantially after that news hit and after the Senate formally released its tax reform proposal, which also included a provision to cancel the state and local tax deduction.
In other words, the propensity to buy on market dips persisted, suggesting perhaps that there was less to the story about what was really driving the early selling interest than met the eye.
What we're driving at is that the stock market was due for a pullback (and still is) with the earnings reporting season coming to an end, the Fed chair nominee having been named, and the tax reform push in Congress fully under way.
That is, there is a current absence of identifiable catalysts to keep the market in an overbought state. Participants, therefore, are finding some excuses to back off their buying efforts -- and there is no better excuse at the moment than the contention that it could be a messy reconciliation process between the House and Senate GOP to get on the same tax reform page before year end.
Separately, President Trump is in Asia talking tough on U.S. trade relationships.
That is no surprise, yet the element of protectionism offers yet another excuse to take some money off the table from a rally that has been helped along by optimistic reflation thoughts that haven't exactly been corroborated by the Treasury market where the spread between the 2-year note yield and the 10-year note yield has fallen to a 10-year low.
It will be a lower start for the major indices, but it won't be a real low start thanks in part to the gains expected to be posted by Walt Disney (DIS) and NVIDIA (NVDA), which are up 2% and 4%, respectively, in pre-market trading following their earnings reports.
True to recent form, though, neither stock has triggered a macro trade that is feeding into a broad market move. The major action is below the surface in individual stocks, whereas, the action at the surface for the major indices has died down after an exhaustive move.