It should surprise no one at this juncture that the stock market rebounded from a weak start yesterday. The Dow Jones Industrial Average and S&P 500, in fact, eked out new record highs after being down 105 and 13 points, respectively.
There won't be a weak start today.
The S&P 500 futures are up six points, the Nasdaq 100 futures are up 14 points, and the Dow Jones Industrial Average futures are up 87 points.
The ostensible catalyst for the positive bias is the news that the Senate voted 51-49 to approve a budget resolution. That has been touted as a step toward getting tax reform done as it was a necessary vote to open up the possibility of passing a tax plan under the reconciliation process, which requires only a simple majority in the Senate to pass tax legislation versus the typical 60-vote threshold.
The Senate budget resolution, though, still needs to be reconciled in conference with the House budget resolution. That might not be the easiest task since the two budget resolutions are not aligned on a deficit-neutral axis, yet the market appears to like the chances of GOP compromise on the budget front.
Our sense is that the stock market has been partial to such an outcome, so don't be surprised if the early pop on the good, but maybe not-so-surprising, news gets faded.
There is little question the stock of General Electric (GE) is going to fade at the open. It's down 7% in pre-market trading after the fallen industrial giant reported much weaker than expected third quarter results and slashed its 2017 outlook.
GE still has a $200 billion market cap, making it the 20th largest company in the S&P 500. Nevertheless, it isn't a market mover because market participants recognize GE has some very company-specific problems; hence it is down 25% year-to-date while the S&P 500 is up 14.4%.
Procter & Gamble (PG) checked in slightly ahead of analysts' average earnings expectations, but is indicated 1.7% lower, while Schlumberger (SLB) posted in-line results and is little changed.
Separately, there are reports this morning that Fed Governor Powell and Stanford economist John Taylor are frontrunners to be named the next Fed chairman. President Trump will make that decision soon and it's a topic I'll be addressing in a column that will be posted to The Big Picture later today.
The current Fed chair, Janet Yellen, will be giving a speech tonight entitled "Monetary Policy Since the Financial Crisis." The title alone suggests it should be a long speech, yet we won't be surprised if it is short on new insight that can move the capital markets in a big way.
Right now, the movement in the capital markets ahead of the Existing Home Sales report for September (Briefing.com consensus 5.29 million; prior 5.35 million) at 10:00 a.m. ET shows strength for stocks and the dollar and weakness for oil (-0.8% to $50.90) and Treasuries.
The latter are down across the board as traders take into account the budget resolution from the Senate that would add to the deficit, albeit without accounting for growth effects, after allowing for tax cuts, and in response to a stock market that is tempting a drain of capital from lower-yielding Treasury securities.