The Memorial Day weekend has arrived for many market participants, which is to say today could be a lightly-traded affair. Frankly, an extended weekend is what this market needs to refresh a bit after an exhausting week of headlines on matters pertaining to trade and North Korea.
Those are the headlines that continue to dominate the narrative this morning and one can't be faulted for digesting them with a "whatever" attitude.
- North Korea is reportedly willing to meet with the U.S. at any time; and President Trump, who canceled the summit yesterday because he didn't like North Korea's hostile tone, tweeted today that it was very good news to receive North Korea's warm and productive statement
- President Trump is reportedly considering taking a harder line on trade with China now that the North Korea summit fell through
- Commerce Secretary Ross is reportedly going to China June 2-4 to talk more about a trade framework between the U.S. and China
- Mexico has reportedly floated an offer to increase the percentage of a car's value that comes from higher-paid workers to 20%, but reportedly that probably won't be satisfactory to U.S. Trade Representative Lighthizer who has set the bar at 40%
In brief, there is a lot of noise in the echo chamber when it comes to trade, which is why the beach, a golf course, or a backyard lounger just might prove to be the best place to not trade today's market.
Throw in a messy political environment in the EU, which is now reportedly dealing with an opposition effort to oust Spanish Prime Minister Rajoy on top of an anti-euro, populist ruling coalition coming to power in Italy, and, well, there's just another reason to turn off the tele and put another shrimp on the barbie to get the holiday weekend started.
Those political problems are shining through in European bond markets. The yield on the German 10-yr bund has dropped five basis points to 0.42% (the yield was at 0.62% a week ago) while the yield on Spain's 10-yr ODE and Italy's 10-yr BTP have both jumped seven basis points to 1.47% and 2.47%, respectively.
The yield on the 10-yr Treasury note, meanwhile, has fallen four basis points to 2.94%, bolstered presumably by safe-haven appeal and short-covering activity.
The drop in long-term rates hasn't excited the futures market. It was up in overnight action, but beginning around 7:00 a.m. ET, the futures turned lower and have been eroding steadily ever since.
Currently, the S&P futures are down eight points and are trading 0.3% below fair value. The Nasdaq 100 futures are down two points and the Dow Jones Industrial Average futures are down 63 points.
The Durable Goods Orders Report for April at 8:30 a.m. ET didn't turn the tide, even though it was a bit better than expected when factoring for the upward revisions for March.
New orders for durable goods declined 1.7% (Briefing.com consensus -1.6%) in April after increasing an upwardly revised 2.7% (from 2.6%) in March. Excluding transportation, orders increased 0.9% (Briefing.com consensus +0.6%) in April after increasing an upwardly revised 0.4% (from 0.0%) in March.
The key takeaway from the report is that it will factor as a positive input for Q2 GDP forecasts since shipments of nondefense capital goods, excluding aircraft, rose 0.8%. It also conveyed a modest pickup in business spending, evidenced by the 1.0% increase in new orders for nondefense capital goods, excluding aircraft.
Similar to past sessions this week, several retailers reported their earnings results, and similar to past sessions this week, the responses have been mixed. Today's examples include Foot Locker (FL), which is up 14% after impressing with its results, and Gap, Inc. (GPS), which is down 7.0% after disappointing with its results.
Separately, oil prices ($68.82, -$1.89, -2.7%) are getting rolled back in a big way as reports circulate that Saudi Arabia and Russia are talking about boosting supply to make up for any shortfalls out of Iran and Venezuela. The drop in prices is apt to be a weight on the energy sector and a potential boon for the transport stocks.