If the stock market is lucky, it can avoid another trading session like the one it experienced on Tuesday. Yesterday was one of those fickle days that was driven by headline volatility and where the narrative was constantly changing to try to keep up with the market's mood swings. Oil prices, meanwhile, cratered in an eyebrow-raising fashion.
Currently, the S&P futures are up 14 points and are trading 0.7% above fair value. The Nasdaq 100 futures are up 37 points and are trading 0.8% above fair value. The Dow Jones Industrial Average futures are up 104 points and are trading 0.6% above fair value.
It was perhaps no coincidence that the S&P 500 ended Tuesday's session relatively flat. It seemed to be an appropriate finish for a trading day that, frankly, was a turn off for investors after Monday's large losses.
There were plenty of traders flipping the switch and turning out the lights on oil. WTO crude futures settled down 7.0% at $55.67 per barrel, which left them 27% below their October 3 high and down for the twelfth straight session.
The outsized loss was generally attributed to concerns about excess supply, yet there was more to the trade than just that.
Undoubtedly, the slide was exacerbated by the triggering of stop-loss orders, yet we heard another cogent explanation this morning that pinned the action on macro funds getting clobbered by a long oil-short natural gas pair trade and margin calls factoring into the mix. Natural gas futures are up 40% this month alone and 55% year-to-date.
There is a sense that the beatdown in oil prices is at, or close to, an end. That sense of matters is fostering some buy-the-plunge interest this morning, along with press reports suggesting the OPEC/non-OPEC grouping could be entertaining a plan to cut production by 1.4 million barrels per day in 2019. WTI crude futures are up 1.0% to $56.23 per barrel.
There is a lot to take in this morning other than the action in the oil market.
- There was some disappointing Q3 GDP data out of Germany (-0.2% qtr/qtr) and Japan (-1.2% qtr/qtr annualized), and some disappointing retail sales data out of China (+8.6% yr/yr versus +9.2% previously), which played into global growth concerns.
- There is a report that the UK and the EU have reached a draft agreement on Brexit that is likely to face plenty of resistance from UK lawmakers.
- There is news that Italy is standing by its 2.4% budget deficit target for 2019, which is not going to make EU officials happy.
- There is news that the Trump Administration is going to reportedly hold off on new auto tariffs for now.
- Utility company PG&E (PCG) is down 21% in pre-market trading after acknowledging it could be subject to significant liability in excess of insurance coverage that would be material to its financial condition if its equipment is found to be the cause of the Camp Fire in northern California.
- Macy's (M) reported better-than-expected third quarter results and raised its full-year outlook for earnings, while upping the low end of its guidance ranges for revenue and comparable-store-sales growth.
Beyond these items, there is some added focus as well on the October Consumer Price Index.
The all items index increased 0.3% month-over-month and the all items index, excluding food and energy, increased 0.2%. Both were in-line with the Briefing.com consensus estimate.
A 3.0% increase in the gasoline index was responsible for about one-third of the increase in the all items index. A 0.2% increase in the shelter index and a 2.6% increase in the index for used cars and trucks were drivers of the uptick in the index excluding food and energy ("core CPI").
On a year-over-year basis, the all items index was up 2.5%, versus 2.3% in September, and core CPI was up 2.1% versus 2.2% in September.
The key takeaway from the report is that it points to a firming in consumer inflation, which fits the Federal Reserve's inclination to raise rates again in December.
The 2-yr note yield is up two basis points to 2.90% and the 10-yr note yield is is up one basis point to 3.16%.
On a related note -- and something that will be in the back of the market's mind today -- Fed Chairman Powell will be speaking at 6:00 p.m. ET with remarks to the Dallas Fed expected to revolve around national and global economic issues.