The futures market has a slightly negative bias this morning. The popular explanation for that disposition is "trade angst," yet the real explanation is trading angst.
Basically, traders are anticipating a bit of a pullback following a scorching run over the past four sessions that has driven the Nasdaq Composite up 2.9%, the S&P 500 up 2.0%, and the Dow Jones Industrial Average up 1.8%.
It's as simple as that.
True, Canada and the U.S. might not strike a trade deal by Friday, yet that thought was every bit as true yesterday -- and the day before... and the day before that -- as it is today.
If the deal doesn't come to fruition by Friday, and there isn't a good sense the benefit of a little additional time will get a deal done, then the market might see a legitimately justified pullback on trade angst.
For today, though, trade angst is a convenient excuse to avoid sharing the typically unsatisfactory explanation that the market is simply due to encounter some profit taking.
That profit taking may not even last long after the open considering how this market has been trading, yet one can only surmise from the direction of the futures market that the initial move today is going to be lower.
The S&P futures are down four points and are trading 0.1% below fair value. The Nasdaq 100 futures are down 13 points and the Dow Jones Industrial Average futures are down 258 points.
There is a fair amount of corporate news rooted primarily in earnings reports out of the retail industry.
Companies like Abercrombie & Fitch (ANF), Dollar General (DG), Dollar Tree Stores (DLTR), Michaels Stores (MIK), Burlington Stores (BURL), and Signet Jewelers (SIG) have posted their results. The reactions have been mixed and mostly company specific, so they haven't necessarily moved the market.
The same can be said for the this morning's economic data, which was largely in-line with consensus estimates.
Personal income for July increased 0.3% (Briefing.com consensus +0.4%), personal spending jumped 0.4% (Briefing.com consensus +0.4%), and the core PCE Price Index, which excludes food and energy, rose 0.2% (Briefing.com consensus +0.2%).
The key takeaway from the report is twofold: (1) the spending increase puts Q3 GDP on a solid growth track and (2) the year-over-year increase in the PCE Price Index (+2.3% vs. +2.2% prior) and the core PCE Price Index (+2.0% vs. +1.9% prior) will keep the Federal Reserve on its tightening track in September.
Initial claims for the week ending August 25 increased by 3,000 to 213,000 (Briefing.com consensus 214,000) while continuing claims for the week ending August 18 decreased by 20,000 to 1.708 million.
The key takeaway from the report is the recognition that the four-week moving average of 212,250 for initial claims is the lowest since December 13, 1969, underscoring the strength in the labor market.
There won't be strength in the stock market at the open, as indicated above, yet it's a reach to label the stock market weak when all it is doing is giving in to some profit taking following a very strong run.