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The small-cap stocks and micro-cap stocks had a good day yesterday amid thin trading conditions that were favorable for more speculative trading action. The rest of the market looked like it was still on holiday. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average all finished less than 0.1% from where they started the session.
The latter actually wasn't bad following the Christmas Eve rally that got the Santa Claus Rally (last five trading days of the year and first two trading days of the new year) off to a roaring start. Little seems to be roaring today.
Currently, the S&P 500 futures are down 24 points and are trading 0.5% below fair value, the Nasdaq 100 futures are down 95 points and are trading 0.5% below fair value, and the Dow Jones Industrial Average futures are down 165 points and are trading 0.4% below fair value.
Holiday lethargy is to blame indirectly, yet a more direct weight is the modest weakness among the mega-cap stocks.
Apple (AAPL), with its near $4 trillion market capitalization, is down 0.2% in thin pre-market trading. Incidentally, Apple's current market cap is almost 33% greater than the market cap of the S&P Midcap 400 and it is approximately 184% greater than the market cap of the S&P Small Cap 600.
Another holdback for the broader market is the 10-yr note yield. It stands at 4.60%. That is down from yesterday's peak of 4.64%, yet that belies the fact that it is up 43 basis points for the month and up nearly 90 basis points since the Fed's first rate cut in September.
The Fed doesn't hold sway over longer-dated maturities like it does over shorter-dated securities, so the bump in rates at the back end of the curve is being watched with an anxious eye as a possible harbinger of a pickup in inflation and/or the budget deficit.
The reaction to this morning's lone piece of economic data was muted. The November Advance International Trade in Goods deficit showed a widening to $102.9 billion from an upwardly revised $98.3 billion (from -$99.1 billion) in October. Exports were $7.4 billion more than October exports, but imports were $12.0 billion more than October imports. Separately, retail inventories were up 0.3% versus an upwardly revised 0.2% (from 0.1%) in October and wholesale inventories were down 0.2% versus a downwardly revised 0.1% increase (from 0.2%) in October.
There might be a tendency to overemphasize the influence of this report simply because the news cycle is lacking items of market-moving importance. That is typically case this time of year, which is why participation is on the light side and why the price action is subject to change without any real change in the news cycle.
