There is no denying that the trading volume has been light this week, yet there is also no denying that the prevailing bias among the limited base of stock market participants has been positive.
In light of the devastation wrought this week in Texas by Hurricane Harvey, and the provocative missile launch by North Korea, it's a testament to the underlying bullish bias that the stock market has fared as well as it has.
Key sources of support have included declining interest rates, a rash of better than expected economic data, a 2.2% gain in Apple (AAPL), and a burgeoning belief that the federal assistance Houston and the state of Texas will need to rebuild after the storm will spark a bipartisan agreement on a budget resolution and debt ceiling increase without any unnecessary political drama.
At the same time, the stock market's resilience itself has been a buying catalyst, as it has left short sellers running for cover and opportunistic traders favoring speculative long positions. Month-end window dressing (which is another way of saying buying the dip after recent losses) has also been thrown into the mix of reasons why the stock market has acted well this week.
From the look of it, the stock market will be acting UP again at today's open.
Currently, the S&P futures are up six points, the Nasdaq 100 futures are up 14 points, and the Dow Jones Industrial Average futures are up 67 points. Those indications, if they hold, suggest the major indices will increase approximately 0.2% when trading begins.
Some encouraging economic data has been a focal point this morning.
China kicked things off overnight with a better than expected manufacturing PMI reading for August (51.7 actual; 51.4 prior). Attention then shifted to the eurozone, which featured a release of CPI data for August that didn't ignite any concerns about the ECB needing to adopt a stepped-up hawkish stance on its monetary policy.
A similar outlook with respect to the Federal Reserve seems to be flowing out of the Personal Income and Spending report for July. That report showed personal income increased 0.4% in July (Briefing.com consensus 0.3%), led by a nice 0.5% increase in wages and salaries, while personal spending increased 0.3% (Briefing.com consensus 0.4%) on the heels of an upwardly revised 0.2% increase (from 0.1%) for June.
The key takeaway from the report, however, was that inflation pressures remained subdued, which suggests to market participants that expectations for another rate hike this year can also remain subdued.
The PCE Price Index and core PCE Index, which excludes food and energy, were both up 0.1% in July. Those increases left the PCE Price Index up 1.4% year-over-year, unchanged from the 12-months ending in June, and the core PCE Price Index up 1.4%, down from 1.5% in June.
PCE price inflation remains well below the Fed's longer run target of 2.0%, yet it is the dip in the core inflation rate that stands out today because that can't be blamed on volatile energy prices.
Separately, the initial claims report was another cookie-cutter report. It showed initial claims for the week ending August 26 increased by 1,000 to 236,000, as expected, and that continuing claims for the week ending August 19 decreased by 12,000 to 1.942 million.
This report marks the 130th straight week that initial claims have been below 300,000, which is reflective of an environment in which employers are reluctant to let go of their workers.
The 10-yr note recouped some modest losses after the release of the Personal Income and Spending report and is back to unchanged, with its yield at 2.13% versus 2.48% at the start of the year. The U.S. Dollar Index (93.13, +0.25, +0.3%), in turn, saw its earlier strength weaken a bit after the release of the report, as rate hike concerns were quieted.