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The first trading day of 2024 had a negative tilt to it, but only because of the lopsided weakness in the mega-cap stocks. The S&P 500 Equal-Weighted Index was just about flat for the session.
There is more of that tilt this morning, which is largely why the futures for the major indices are leaning lower.
Currently, the S&P 500 futures are down 21 points and are trading 0.5% below fair value, the Nasdaq 100 futures are down 104 points and are trading 0.7% below fair value, and the Dow Jones Industrial Average futures are down 136 points and are trading 0.4% below fair value.
Pre-market indications show the "Magnificent 7" stocks all trading lower in what appears to be a continuing profit-taking effort. Some might even label it a de-risking move given the concentration risk in the names that accrued throughout 2023.
The market's eyes will be fixed on these names, but not necessarily locked in on them. Where participants are going to be locked in is watching to see if the broader market can hold the line on rotational activity or if any continuing weakness in the mega-cap stocks diminishes investor sentiment to the point that everything rolls over.
Knowing that just about everything has rallied in the last nine weeks, it is fair to assume that the risk of profit taking is not a completely lopsided risk.
There is some added trading risk embedded in today's session. We say that because the market won't be devoid of market-moving news catalysts after today's open.
The December ISM Manufacturing Index (Briefing.com consensus 47.1%; prior 46.7%) and the November JOLTS - Job Openings Report (Prior 8.733 million) will be released at 10:00 a.m. ET.
The primary focal point, though, is apt to be the release of the minutes for the December 12-13 FOMC meeting at 2:00 p.m. ET. At the time, the market loved hearing Fed Chair Powell suggest there was some talk at the meeting about when it might be appropriate to lessen the policy restraint.
Market participants will want to see today just how involved that conversation was. If it doesn't sound as lively as the market thought it was at the time, then market rates are at risk of backing up and serving as a catalyst for stocks rolling over.
Treasuries were a bit weaker yesterday and they are a bit weaker ahead of the stock market's open. The 2-yr note yield is up two basis points to 4.35% and the 10-yr note yield is up two basis points to 3.97%.
There hasn't been much corporate news of note, but analysts have provided some trading fodder with a bevy of ratings actions, including a Wolfe Research upgrade of Citigroup (C) and JPMorgan Chase (JPM) to Outperform from Peer Perform, a KeyBanc Capital Markets upgrade of Verizon (VZ) to Overweight from Sector Weight, a Mizuho downgrade of ExxonMobil (XOM) to Neutral from Buy, and a Goldman Sachs downgrade of Charles Schwab (SCHW) to Neutral from Buy.
Finally, today marks the end of the Santa Claus Rally period (last five trading days of the year and the first two trading days of the new year). With yesterday's retreat, Santa Claus has fallen off the radar. The S&P 500 enters today down just shy of 0.1% over the trading span of interest.
