The stock market got tripped up last week as talk of impeachment entered the mix, yet it didn't fall flat on its face. On the contrary, it soon found its balance and put together another buy-the-dip response that was, well, just a peach.
A 1.8% decline last Wednesday was followed by a combined 1.1% gain on Thursday and Friday. When it was all said and done, the S&P 500 dipped just 0.4% for the week. That wasn't bad at all given the negative tone of the political headlines and the continued underperformance of the financial and transport stocks.
The latter groups need to get it in gear, though, if this market is going to drive to new highs in convincing fashion. At the moment, it's just idling near record highs, having been restrained by narrow leadership and valuation concerns.
The market's engine is running again this morning, but as of now, it sounds more like a Toyota Prius than a Harley Davidson. To wit, the S&P futures are up two points and are trading 0.1% above fair value.
Oil prices ($51.05, +$0.72, +1.4%) continuing to run on optimism over the possible extension, and deepening, of production cuts at an OPEC/non-OPEC meeting later this week have helped prop things up.
Even so, it's a pretty neutral opening indication, which fits the script on two levels.
First, today's headlines are a hodgepodge of items that are interesting in their own respect but don't exactly have market-moving impact. Secondly, traders recognize there are other items on tap this week contributing to a wait-and-see mindset.
President Trump's trip abroad is being followed closely by the media. Reports of a major arms deal with Saudi Arabia have been the highlight so far. That is giving many of the defense stocks a nice boost, which will be a support for the industrials sector. Still, the broader market seems to have contained its excitement for the news.
Similarly, it isn't getting too fired up by the news that Mark Fields will be replaced as CEO at Ford (F), that Huntsman (HUN) and Clariant (CLZNY) will be tying up in a $14 billion all-stock merger of equals, and that North Korea conducted another missile test.
There is a sense that the market is waiting to see how things trade following last week's roller-coaster activity, cognizant that there could be some market-moving items developing as the week unfolds.
The featured lineup of tradable events includes:
- The Trump Administration's budget proposal, which is expected on Tuesday
- A House Oversight Committee hearing on May 24 to investigate further the Trump-Comey interactions
- The release of the FOMC Minutes for the May 2-3 meeting on Wednesday
- The Congressional Budget Office presumably releasing its scoring of the House GOP's health care replacement bill on Wednesday; and
- The OPEC/non-OPEC production meeting on Thursday
Tucked in between will be several speeches from Fed officials, and, of course, it won't be lost on traders that a holiday weekend beckons on Friday.
There is much work still to be done, however, before the holiday starts. The key is in the ignition, yet it remains uncertain if a relatively quiet hybrid start will give way to a V8 finish.