There is a negative disposition in the futures market this morning that has the cash market slated to slide at the open. The S&P futures are down 13 points, the Nasdaq 100 futures are down 46 points, and the Dow Jones industrial Average futures are down 86 points.
A sure sign of a market that has gotten overextended on a short-term basis is the palpable angst that arises from the sudden shift in tone.
What is going on? Why is this happening? Is this the start of the end of the bull market?
The straightforward answer is that no one knows for sure.
There will be an insinuation today that the market is weak because investors are growing nervous over the thought that Congress won't be able to pass a tax plan. Really, though, when has that possibility not been part of the narrative?
That has always been a possibility, yet it hasn't stopped the Nasdaq from gaining 7% over the last two months or the S&P 500 from advancing 5% over the same period.
On a related note, it has been reported that the House Ways and Means Committee will release a revised version of the GOP tax bill today while the Senate Finance Committee will check in at 11:30 ET with a conceptual plan of what it is thinking with respect to tax reform initiatives.
Some will point to the ugly response to Kohl's (KSS) earnings report as a driver of the negative bias, as it will drum up renewed angst about the prospects for brick-and-mortar retailers in the face of online competition and a seeming race-to-the-bottom offline to maintain market share via huge discounts.
Shares of KSS are down 7% in pre-market action. Conversely, shares of Macy's (M) are up 2% after reporting its results.
The real surprise perhaps isn't that Kohl's results failed to impress, but rather, that its stock continues to languish, inviting allegations that it -- and other retail stocks -- could just be a value trap. In any event, the tone surrounding the retail industry, and mall-based retailers in particular, remains a discordant one.
That is having some impact on the futures trade; and we would venture to guess that so, too, is the intraday volatility that was seen in Japan's Nikkei.
The Nikkei gained as much as 2.0% on Thursday and then somewhat abruptly declined 3.7% from its intraday high to its intraday low before closing the session down 0.2%.
Keep in mind that the Nikkei, at its high on Thursday, was up 21.3% since September 8. To say it is overbought on a short-term basis and due for a pullback is an understatement.
Anyhow, the abrupt reversal in the Nikkei intraday has probably triggered an inclination among traders playing the U.S. market to take some money off the table from the big move seen here. The S&P 500 information technology sector, for instance, has surged 7.9% in the last month.
The latest initial claims report hasn't caused any undue concern. Granted initial claims for the week ending November 4 increased by 10,000 to 239,000 (Briefing.com consensus 231,000), yet the four-week moving average of 231,250 stands at its lowest level since March 31, 1973.
Continuing claims for the week ending October 28 increased by 17,000 to 1.901 million, yet the four-week moving average of 1,895,250 is the lowest level since January 12, 1974.
The key takeaway is that initial claims are low and indicative of a tight labor market.
And so it is today in the stock market where things are a little tight after having run loose, and mostly unchained, for an extended period. The major indices will lose ground at the open, because traders are finding excuses to pull back on buying efforts for the time being.