The stock market staged a relief rally on Monday, but it seemed as if everyone didn't receive an invitation to the party. Trading volume was noticeably light given the favorable tenor of the headlines that pointed to an easing of trade tensions between the U.S. and China.
The light volume may have reflected an appreciation for the possibility that the tenor of those headlines is subject to change since (a) no specific details on a trade agreement were provided (b) there was a suggestion by NEC Director Kudlow that the U.S. could impose tariffs on China again if it deemed necessary (c) the conciliatory tone could fade away if the North Korea summit does not go well and (d) midterm election campaigning could open the door for renewed criticism of China's trade practices.
The latter thoughts notwithstanding, there was a clear upside bias on Monday among those participating in the trading action. That bias has persisted this morning, although it isn't crystal clear like it was before Monday's open.
Currently, the S&P futures are up four points and are trading 0.2% above fair value. The Nasdaq 100 futures are up 21 points and the Dow Jones Industrial Average futures are up 41 points.
The major indices are headed for a positive start, but with some subdued enthusiasm.
Trade matters are a focal point again after China's Finance Ministry said China will cut its tariff on passenger vehicles to 15% from 25% and its tariff on auto parts to 6% from a range of 8-25%. That's a positive development for the auto makers, many of which, both foreign and domestic, are trading higher in the early going.
Meanwhile, The Wall Street Journal reports that President Trump could lift the ban on U.S. companies selling to Chinese telecom equipment company ZTE Corp. if there are management changes at the company and China removes tariffs on farm products.
It's not just about trade matters this morning, however. There has been a handful of corporate news that is also helping to sustain Monday's positive bias.
- Auto parts retailer AutoZone (AZO) is up 3.0% after posting better than expected earnings
- Kohl's (KSS) is up 5.6% after the retailer impressed with its earnings results, same-store-sales, and FY19 guidance; and
- Micron (MU) is up 7.3% after announcing a $10 billion buyback plan on the heels of increasing its fiscal third quarter expectations
Homebuilder Toll Brothers (TOL), however, is on the flip side of things. Its stock is down 4.0% after the company came up shy of fiscal second quarter earnings estimates.
There isn't any U.S. economic data of note today, yet the Treasury market will have its hands full digesting $104 billion of new supply, including $45 billion of four-week bills, $26 billion of 52-week bills, and $33 billion of 2-yr notes.
So far, there has been little change in the Treasury market. The 2-yr note yield is unchanged at 2.57% and the 10-yr note yield is down one basis point to 3.06%.
Oil prices (+0.4% to $72.54) continue to head higher, yet the U.S. Dollar Index (-0.25% to 93.44) has backed off in early action with the euro, yen, and British pound all moving up against the greenback after experiencing some steady selling pressure of late.