An unsettling trade has unfolded in the futures market this morning. Specifically, there has bee a notable reversal off the overnight highs without any particular news catalyst to account for the shift in sentiment.
The S&P futures, which hit 2636 around 5:20 a.m. ET, are now trading at 2620.00, down seven points and 0.5% below fair value.
The latter will translate into a lower start for the cash market. It won't be a major loss, yet it's majorly disappointing nonetheless for market bulls who witnessed a late-day slide yesterday and an inability to hold a rebound try this morning.
The Dow Jones Industrial Average futures are down 100 points and the Nasdaq 100 futures are down 24 points.
Negative responses to the earnings reports and/or outlooks from growth stocks Tesla (TSLA) and Spotify (SPOT) have contributed to the negative tone. Those stocks are down 7.7% and 10.3%, respectively, in pre-market action.
The weakness, however, stretches beyond the domain of growth stocks. For instance, Cardinal Health (CAH) and American International Group (AIG) are indicated 13.0% and 7.1% lower following their weaker than expected earnings results.
Kellogg (K), on the other hand, is a standout, trading up 3.9% after its earnings report.
To say the last, it is a very discriminating stock market these days, so one can't get romanced by the earnings headlines alone as there is often more to the trading story than meets the headline eye.
That has proven true from a broad market standpoint considering the best earnings reporting season since the third quarter of 2010 has done nothing to improve the market. Since JPMorgan Chase reported its results before the open on April 13, the S&P 500 has declined 1.1%.
Concerns about peak earnings, rising interest rates, a slowdown in growth, trade issues, and the budget deficit have all factored into the trading mix, yet the price action itself has arguably been the biggest deterrent. There has been a persistent inclination to sell into strength and a lack of conviction to buy on dips as a result of it.
We'll see if any of that changes today on what is a very busy day for news.
Earnings results have littered the headline landscape, yet there is some added media attention on Treasury Secretary Mnuchin's trip to China to discuss trade, softening CPI data out of the eurozone, and a litany of economic releases out of the U.S. this morning.
- The trade deficit in March narrowed to $49.0 billion (Briefing.com consensus -$49.8 billion) from $57.7 billion in February as an increase in exports outlegged a decrease in imports by a comfortable margin
- The key takeaway from the report, though, is that it will continue to feed the Trump Administration's trade fire as deficits were recorded with China, the EU, Mexico, Japan, Germany, OPEC, and Canada
- First quarter productivity increased 0.7% (Briefing.com consensus +0.8) from an upardly revised 0.3% increase in the fourth quarter. Unit labor costs were up 2.7% (Briefing.com consensus +3.0%) after a downwardly revised 2.1% increase (from 2.5%) in the fourth quarter.
- The key takeaway from the report is that productivity is improving, yet it is still running at relatively weak levels. On a year-over-year basis, productivity was up 1.3% versus the 0.7% annual average for 2007 to 2017.
- Weekly initial claims for the week ending April 28 increased by 2,000 to 211,000 (Briefing.com consensus 220,000). Continuing claims for the week ending April 21 decreased by 77,000 to 1,756,000, which is the lowest level since December 8, 1973.
- The key takeaway from the report is that it continues to underscore a condition of tightening supply in the labor market
The ISM Services Report for April (Briefing.com consensus 58.3; Prior 58.8) and the Factory Orders Report for March (Briefing.com consensus +1.2%; Prior +1.2%) will both be released at 10:00 a.m. ET.