There were several shutdowns this past weekend. The Minnesota Vikings and the Jacksonville Jaguars were shut down, and so was the U.S. government. Frankly, we're not sure which development the stock market cares about more, because there isn't much read-through in the futures market.
To wit, the S&P 500 futures are down two points, the Nasdaq 100 futures are down three points, and the Dow Jones Industrial Average futures are down just 55 points.
These indications follow a week (an abbreviated one at that) in which the Dow, Nasdaq, and S&P 500 gained 1.0%, 1.0%, and 0.9%, respectively.
The one takeaway at this juncture is there is an abiding sense that this government shutdown, too, will soon pass. The last shutdown was in 2013. It lasted 16 days. The latest shutdown, which is entering its third day, could end today if the Senate approves a short-term funding resolution in a vote that is expected to happen around 12:00 p.m. ET.
There is no good sense at the moment as to whether that vote will pass, yet the game of political brinkmanship has been played so many times now that market participants aren't going to be unnerved too greatly at this stage of the game.
Government operations won't be running at full tilt because of the lack of funding; however, the concern about what that ultimately means for the U.S. economy and earnings prospects is proportional to the change seen in the futures market.
In other words, market participants aren't factoring in any material impact at this juncture.
Some M&A activity has provided a welcome distraction to the political news and has also provided some support for the futures market.
Sanofi (SFY) is buying Bioverativ (BIVV) for $11.6 billion, or $105.00 per share, in cash; Celgene (CELG) is acquiring Juno Therapeutics (JUNO) for approximately $9.0 billion, or $87.00 per share, in cash, and AIG (AIG) is buying Validus Holdings (VR) for approximately $5.6 billion, or $68.00 per share in cash.
These deals have all come with nice-sized premiums to the target's unaffected stock price, which is driving home the point for some that this market still has room for upside -- and perhaps material upside under the right set of circumstances.
Rising interest rates, though, don't necessarily fall under that umbrella. The 10-yr note yield closed Friday at its highest level since mid 2014, taking out resistance at 2.63%, which created an opening to continue on a path toward 3.00%. The latter is a level where some market pundits think the plot will thicken for this bull market.
For now, there is a willingness to view the jump in rates as sign of economic optimism that is expected to translate into stronger earnings growth and which, in turn, is feeding a rotation out of bonds and into stocks.
Earnings news will be a focal point all week, starting with the Netflix (NFLX) report after today's close. There will be close to 80 S&P 500 companies reporting their results for the December quarter this week.
Aside from the earnings news, there will be ample press attention on the World Economic Forum, which is being held in Davos, Switzerland, as well as the policy meetings being conducted by the Bank of Japan and the European Central Bank, and the advance Q4 GDP report on Friday.
In brief, the capital markets will have plenty to chew on this week from a news standpoint, yet clearly it isn't choking on government shutdown concerns at this point as there is a sense that, too, will pass just like Nick Foles and Tom Brady did to shut down the Minnesota Vikings and Jacksonville Jaguars.