Another tariff hike on imported Chinese goods has been delayed, and, apparently, so has the stock market's enthusiasm for that news. The latter isn't really the case. The stock market has been fired up about this news for weeks now, which is why its response on Monday was more modest in scope than many casual observers might have expected.
The news has been remonstrated in some circles, though, for lacking any specific details about compromises on structural trade issues. That was reportedly another reason why the market didn't take off on Monday.
Sometimes, a market that has run nearly 20% in eight weeks can be tough to satisfy fully when it has already taken a lot of satisfaction from news it expected to hear.
Accordingly, it is possible that there will be a redux today with Fed Chair Powell set to deliver his semi-annual monetary policy testimony before the Senate Banking Committee, starting at 9:45 a.m. ET.
The market has been well aware that the Fed has pivoted to a more dovish-minded stance and that it appears ready to stop reducing the assets on its balance sheet later this year. The market is also well aware that the Fed aims to be patient with its policy approach, assessing incoming data to determine if the U.S. economy is falling prone to downside risks or is managing to evade them.
It won't be a bad thing for the market to hear Fed Chair Powell reiterate all of that in his testimony today, yet it shouldn't come as a surprise if the market doesn't react strongly to those views. It has already reacted with a near-20% move in eight weeks.
Therefore, if the market reacts strongly to the Fed chair's testimony today, it will be because Mr. Powell said something negative to upset the market's prevailing view on the policy outlook.
The market is already leaning a bit lower this morning, having been tipped over by some disappointing FY20 earnings guidance from Dow component Home Depot (HD), a UBS downgrade of fellow Dow component Caterpillar (CAT) to Sell from Buy, and weaker-than-expected level of housing starts in December.
Shares of HD and CAT are both indicated more than 3.0% lower. Tesla (TSLA), a popular trading vehicle, is indicated 2.5% lower following reports the SEC has asked a judge to hold Elon Musk in contempt for violating a previous deal regarding restrictions on his ability to post company tweets.
The negative bias for the broader market, however, isn't all that negative.
The S&P futures are down eight points and are trading just 0.2% below fair value. The Nasdaq 100 futures are down 34 points and the Dow Jones Industrial Average futures are down 137 points, which leaves them 0.4% and 0.5% below fair value, respectively.
This was close to where the opening indication stood before the release of the Housing Starts and Building Permits Report for December, which only added to the downside bias in a modest way.
The headline of note came from housing starts, which declined 11.2% month-over-month to a seasonally adjusted annual rate of 1.078 million (Briefing.com consensus 1.254 million). Building permits were up 0.3% month-over-month to a seasonally adjusted annual rate of 1.326 million (Briefing.com consensus 1.290 million).
The key takeaway from the report is that it reinforced the understanding that new supply is slow to develop. Single-family starts fell 6.7% to 758,000, with declines in all regions, except the South (+2.2%). Meanwhile, permits for single-family units declined 2.2% to 829,000, held back by a 4.0% decline in the South, which is the largest market for new home construction.
Another important report to be released today is the Consumer Confidence Report for February (Briefing.com consensus 125.0; Prior 120.2), which will be out at 10:00 a.m. ET. Market participants will be anxious to see if confidence picked up along with the mood of the stock market.