The rally the stock market strung together on Tuesday is going to be unwound to a large extent at today's open. The S&P futures are down 16 points and are trading 0.6% below fair value. The Nasdaq 100 futures are down 60 points and the Dow Jones Industrial Average futures are down 155 points.
The reversal in sentiment is being linked again to concerns about Turkey, which goes to show how yesterday's rally, which was linked to easing concerns over Turkey, was mostly fluff after four straight losing sessions.
Furthermore, there wasn't a lot of active involvement in Tuesday's gains. Volume was low at the NYSE, which means Tuesday's rally -- and today's dour disposition before the open -- could simply be a byproduct of thin trading conditions.
The bill of sale today, however, shows Turkey, China, and a strengthening dollar high on the list of reported concerns.
The angst with respect to Turkey resurfaced with the news that Turkey is jacking up tariffs on several U.S. imports, including alcohol, cars, and cigarettes. That move is all about political posturing, because it certainly won't help Turkish citizens already confronted with high inflation. Separately, it was also reported that a Turkish court rejected the appeal for the release of Pastor Andrew Brunson.
When it comes to China, a weaker yuan, a weaker Chinese stock market (Shanghai Composite -2.1%), and a recalcitrant position on trade matters continue to garner attention. The drop in copper prices ($2.61/lb, -$0.07, -2.6%), though, is perhaps the best proxy when it comes to the market's perspective on China's economic outlook.
Copper prices are down 21% year-to-date, which fits with the prevailing view that China's economy is running into some problems due partly to trade matters and partly to issues of its own making.
Anyhow, the drop in copper prices in the face of strong growth in the U.S. is one of the developments in the market, along with the flattening yield curve, that continues to send mixed messages that foment arguments about peak growth.
This morning's economic data provided some positive headline surprises. Retail sales for July, Q2 Productivity, and the Empire State Manufacturing Survey were all stronger than expected.
- Retail sales increased 0.5% (Briefing.com consensus +0.1%) following a downwardly revised 0.2% increase (from +0.5%) in June . Excluding autos, retail sales rose 0.6% (Briefing.com consensus +0.3%) after increasing a downwardly revised 0.2% (from 0.4%) in June.
- The key takeaway from the report is that the downward revisions to June mitigated the July headline surprise. That point notwithstanding, core retail sales, which exclude autos, gasoline station, building materials, and food services sales, were up 0.5%, which is a positive input for Q3 GDP forecasts.
- Q2 Productivity increased 2.9% (Briefing.com consensus 2.0%), which was the strongest increase since the first quarter of 2015. Unit labor costs, however, decreased 0.9% (Briefing.com consensus +0.5%).
- The key takeaway from the report is that labor costs look to be in check, which will facilitate a gradual tightening path for the Federal Reserve.
- The Empire State manufacturing Survey checked in at 25.6 (Briefing.com consensus 20.0) following a 22.6 reading for July.
- The key takeaway from the report is that firms remained moderately optimistic about the six-month outlook, but less so than earlier in the year.
In corporate news, Macy's (M) reported better than expected second quarter earnings results and raised its full-year outlook. Its stock is down 5.2% in pre-market action, though, with reports attributing the selling to some disappointment over some weak overall sales activity.