Monday was another ugly day for the information technology sector, which succumbed to further profit-taking efforts that ended up dragging down the entire market. Granted there was some relative strength in other areas, like energy, yet it wasn't enough to overcome the losses registered in the market's most heavily-weighted sector.
This morning, some repair work is being attempted.
The S&P futures are up six points and are trading 0.2% above fair value. The Dow Jones Industrial Average futures are up 13 points and the Nasdaq 100 futures are up 18 points.
Frankly, those gains are relatively weak in light of the pullback seen of late, particularly for the Nasdaq. That suggests market participants remain a little suspect about the launch of a concerted rebound effort.
The market's mettle will need to be tested, which is apt to be done with some selling into the opening strength and assessing whether the market moves quickly to snuff out that selling effort or relents and watches the S&P 500 slide below a key support level at 2800.
That's just one thing among a lot of things market participants will be considering today. There is a lot of earnings news, a lot of economic data, an intriguing policy decision by the Bank of Japan, the start of the two-day FOMC meeting, and the specter of Apple's (AAPL) earnings report after the close.
The earnings news featured reports from Dow components Pfizer (PFE) and Procter & Gamble (PG). Both companies topped consensus earnings estimates (no surprise there), yet both stocks are trading down in pre-market action.
On the economic front, manufacturing PMI data out of China was weaker than expected, Q2 GDP data out of the eurozone was weaker than expected, and the Personal Income and Spending Report for June out of the U.S. was mixed.
With respect to the latter, personal income increased 0.4%, as expected. Personal spending also rose 0.4%, which was a bit weaker than the 0.5% increase expected by the Briefing.com consensus. The PCE Price Index was up 0.1%, as expected. The core PCE Price Index, which excludes food and energy, also increased 0.1%, which was a bit less than the 0.2% increase expected by the Briefing.com consensus.
On a year-over-year basis, the PCE and core PCE Price Indexes held steady at 2.2% and 1.9%, respectively.
The key takeaway from the report is that it didn't produce any real surprises, which means it should keep the Federal Reserve inclined to think that it can continue to raise interest rates.
Separately, the Q2 Employment Cost Index increased 0.6% (Briefing.com consensus +0.7%), driven by a 0.5% increase in wages and salaries and a 0.9% increase in benefit costs.
The FOMC begins its two-day meeting today and it is not expected to raise the target range for the fed funds rate at the conclusion of that meeting on Wednesday. The next rate hike, based on prevailing market expectations, is likely to be announced at the September FOMC meeting.
The Bank of Japan (BOJ) for its part didn't announce a rate hike today either. It voted 7-2 to keep its key policy rate unchanged at -0.1%. The BOJ also agreed in the 7-2 vote to purchase Japanese government bonds so that 10-year JGB yields will remain around zero percent.
According to The Wall Street Journal, BOJ Governor Kuroda acknowledged at his press conference that the BOJ is willing to let 10-year yields move within a range of -0.2% to 0.2%.
Basically, the BOJ did little to distance itself from its ultra-easy monetary policy. On the contrary, it reinforced expectations that it is going to remain ultra-accommodative by including forward guidance that it intends to maintain the currently extremely low levels of short- and long-term rates for an extended period of time.
The latter concession runs counter to the speculation ahead of the meeting that the BOJ might start to distance itself from the ultra-loose policy, as the Federal Reserve and ECB have done. Alas, the BOJ is staying the course, which is why the yen is weaker against the dollar and sovereign bond yields have retreated following the BOJ decision.
Shares of Apple (AAPL), meanwhile, are up modestly ahead of the open. A lot of market participants are hoping the company can throw the market a lifeline with its earnings report and outlook, as there has been a sinking feeling of late in the wake of the reports from Netflix (NFLX), Facebook (FB), Intel (INTC), and Twitter (TWTR) to name a few.