Following Monday's retreat, Tuesday's turnaround effort lacked gusto. The S&P 500 ended flat, the Dow Jones Industrial Average finished slightly lower, and the Nasdaq Composite mustered a 0.2% (rounded up) gain.
There is some more buying conviction this morning, however. The S&P futures are up five points, the Nasdaq 100 futures are up 16 points, and the Dow Jones Industrial Average futures are up 27 points.
Traders are presumably sniffing the fumes of a tax reform plan that President Trump is expected to introduce in a speech around 3:00 p.m. ET.
The framework of that plan, which will reportedly include a cut in the corporate tax rate to 20%, a doubling of the standard deduction, and only three individual tax brackets among other things, has been floated in press reports. Nevertheless, the introduction of an actual plan is being viewed as a supportive reminder for market participants that tax reform is the focal point.
What is apt to be missing from today's tax plan introduction is how it gets paid for without increasing the deficit. That could be a potential buzz kill, but for now, the market is relishing the notion of a tax reform plan of some kind getting done soon.
Accordingly, there are some vestiges of the so-called "reflation trade" being seen this morning.
The U.S. Dollar Index is up 0.5% to 93.47, oil prices are up 0.1% to $51.91 per barrel following some mixed inventory data from the American Petroleum Institute, and sovereign bonds are under selling pressure that has pushed the yield on the 10-yr note up seven basis points to 2.30% and has led to some curve steepening.
The curve steepening should be pleasing to the eye of investors in the financial sector, which has the foundation to assume a leadership position at the open. The same goes for the information technology sector, and specifically the semiconductor stocks, thanks to the better than expected earnings report and pleasing outlook from Micron Technology (MU).
Shares of MU are trading 5.0% higher in pre-market action and are expected to provide a rebound boost for the Philadelphia Semiconductor Index, which has dropped 2.0% over the last two sessions.
Shares of Dow component Nike (NKE), on the other hand, are tracking 3.4% lower after the athletic footwear and apparel company topped earnings expectations for its fiscal first quarter on scant revenue growth and issued a disappointing gross margin outlook for the fiscal second quarter.
The Durable Goods Orders report for August wasn't disappointing. New orders for durable goods increased 1.7% (Briefing.com consensus 0.7%) while new orders, excluding transportation, jumped 0.2%, as expected, following an upwardly revised 0.8% increase (from 0.5%) in July.
The key takeaway from the report is that it showed a continued pickup in business spending and a favorable translation of that increased activity for Q3 GDP forecasts.
Specifically, new orders for nondefense capital goods excluding aircraft -- a proxy for business spending -- increased 0.9% on the heels of a 1.1% increase in July. Shipments of those goods, which factor into GDP growth computations, rose 0.7% after increasing 1.1% in July.
This good economic news has kept the pressure on the Treasury market, which is growing increasingly attentive to the prospect of another rate hike at the December FOMC meeting.
The Durable Goods Orders report for August can be filed away as a report that is on the Fed's side in that respect.