10%... that's the gain for the S&P 500 since its low on December 24. That covers a span of just ten trading sessions. It's a fantastic return by any measure and it's one reason why the market is expected to start today on a lower note.
The inference is that the market is overbought on a short-term basis and due to wrestle with some profit-taking efforts.
That doesn't mean necessarily that the market is certain to lose ground today when it is all said and done. After all, everyone is kind of expecting the market to take a breather, and regular readers should know by now that when "everyone" is expecting the same thing, counter-intuitive surprises often happen.
What it means is that the market's straight-line recovery effort might grow a little less taut as profit-taking efforts run some interference.
There are some headline catalysts that are expected to spur some profit-taking activity, too.
- Macy's (M) lowered its net sales, comparable store sales, and EPS forecasts for fiscal 2018.
- American Airlines (AAL) lowered its FY18 EPS guidance after stating its Q4 total revenue per available seat mile is expected to be at the low end of its previous guidance range of up 1.5% to 3.0%.
- China reported weaker than expected inflation data, which goes hand-in-hand with a weakening economy.
- There is no sign of a compromise being struck to end the partial government shutdown, which is threatening to become the longest on record.
- Global growth concerns are permeating with France reporting a surprising 1.3% decline in November industrial production and China experiencing its first yearly drop in auto sales in 20 years.
This is what happens, though, after such a strong run. Suddenly, negative news items that had been ignored during the run come back into focus and other items, previously seen as a positive, start getting picked apart as perhaps not being so positive.
To wit, we are struck this morning by reports pinning the weakness in the futures market on some angst surrounding the U.S.-China trade talks. Those talks have concluded, and while they were happening, the market was aglow with optimism that nothing negative-sounding was coming out of them.
Nothing negative came out of the summary statements issued today by the involved parties either, yet there is reportedly some angst that there was a lack of detail in the statements.
Anyhow, a market looking for an excuse to sell can always find one and that is an excuse this morning. The S&P futures are currently down 13 points and are trading 0.7% below fair value.
That negative indication remained intact despite a better than expected jobless claims report, which showed initial claims decreasing by 17,000 to 216,000 (Briefing.com consensus 225,000) for the week ending January 5. Continuing claims for the week ending December 29 decreased by 28,000 to 1.722 million.
The key takeaway from the report is that it fits neatly with the market's latest awareness that the labor market has held up fine despite the burgeoning concerns about the economy slowing.
There will be plenty of opportunity today to hear some insight on the economic outlook. Five Fed members are slated to make remarks before the market closes today, including Fed Chair Powell who will be speaking at 12:45 ET to the Economic Club of Washington.
Expect some harmony in the view that the Fed is going to be data dependent and is inclined right now to be patient with its policy approach.