Monday was just like the good old days, which weren't that long ago. The major indices scored big gains in a trade that was bolstered by a dip in long-term rates and a fear-of-missing-out on further gains.
The S&P 500 has climbed 76 points, or 2.8%, in the past two sessions. Having done so, the pressing question has shifted from when will there be a re-test of the lows to when will there be a re-test of the highs?
At its current level, the S&P 500 is less than 100 points from its all-time high and 246 points, or nearly 10%, above its February 9 low.
The recovery effort has been quick -- almost as quick as the 10%+ decline was earlier this month. It has been underpinned by corporate buyback activity and a bullish bias oriented around the leadership of the technology, financial, and consumer discretionary sectors with particular strength in the likes of Apple (AAPL), JPMorgan Chase (JPM), and Amazon.com (AMZN).
An added tailwind of late has been the recognition that the 10-yr note yield has been pulled back from the brink of 3.00%.
Interest rates are certain to be a focal point today as they will help market participants read the tea leaves of Fed Chairman Powell's semiannual monetary policy testimony before the House Financial Services Committee at 10:00 a.m. ET.
This will be the market's first glimpse of Mr. Powell's monetary policy leadership style as head of the Federal Reserve. What he says in the Q&A portion of the testimony has market-moving potential.
His prepared testimony was pretty much on script, with some of the key talking points revolving around the shortfall in inflation as likely reflecting transitory influences, recent stock market volatility not weighing on the economic outlook, fiscal stimulus becoming more stimulative for the economy, and the risks to the outlook being roughly balanced.
The overriding point, though, is that he expects further gradual rate increases based on the economic outlook. Sounds pretty status quo -- and unsurprising -- relative to what has been conveyed by other Fed officials. Notably, he acknowledged that he finds rule prescriptions helpful for setting monetary policy.
Mr. Powell is a veteran of Fed communication. He has seen how a slip of the tongue by his predecessors has created some unnecessary havoc, so we expect him to be very careful with his word choice as he responds to questions with an aim of emphasizing that the Fed's policy decisions will be data dependent.
Speaking of data, there was some economic data this morning and it wasn't too hot.
Durable goods orders declined 3.7% in January (Briefing.com consensus -2.0%) following a downwardly revised 2.6% increase (from 2.9%) in December. Excluding transportation, orders fell 0.3% (Briefing.com consensus +0.5%) after increasing an upwardly revised 0.7% (from 0.6%) in December.
The key takeaway from the report is that there wasn't a lot of carryover order momentum from December, suggesting first quarter activity is proceeding at a slower pace.
Orders for nondefense capital goods excluding aircraft -- a proxy for business investment -- decreased 0.2% in January. Shipments of these goods were up a modest 0.1% after increasing 0.7% in December.
Separately, the advance report on international trade in goods showed a widening in the goods deficit to $74.4 billion (Briefing.com consensus -$72.2 billion) from $72.3 billion in December. The widening was driven by exports of goods being $3.1 billion less than December exports and imports of goods being $0.9 billion less than December imports.
This report will contribute to concerns about a rise in trade protectionism, especially since the decrease in goods exports occurred despite a weaker dollar.
Currently, the S&P futures are down three points but are trading a smidgen above fair value. The Nasdaq 100 futures and Dow Jones Industrial Average futures are also little changed.
The lack of conviction is understandable leading up to Mr. Powell's testimony, but it is intriguing nonetheless considering Macy's (M) delivered better than expected earnings, which has sent its stock up nearly 10% in pre-market action, and Comcast (CMCSA) is reportedly eyeing a $31 billion bid to acquire a large stake in Sky, potentially upsetting the bid made for Sky by 21st Century Fox (FOXA).