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A good rebound day yesterday ended up being just an okay rebound day thanks to a final hour sell-off that cut sharply into larger gains. There is a bid this morning, however, to reclaim what the market gave up in that final hour.
Currently, the S&P 500 futures are up 55 points and are trading 1.0% above fair value, the Nasdaq 100 futures are up 233 points and are trading 1.2% above fair value, and the Dow Jones Industrial Average futures are up 293 points and are trading 0.8% above fair value.
We see three, primary drivers behind the positive disposition in the futures trade:
- The Bank of Japan's Deputy Governor Uchida said the bank will not raise rates during market instability. That view has calmed some of the concerns about the possibility of a further unwinding of carry trade positions, and has led to a weakening in the yen. USD/JPY +1.9% to 147.07.
- There is a budding notion that the concerns about the U.S. economy sliding into a recession have been overblown. Yesterday, the Atlanta Fed GDPNow model estimate for real GDP growth in the third quarter was 2.9%, up from 2.5% on August 1.
- Mega-cap stocks are trading higher in pre-market action.
Notwithstanding the angling for a positive open, it isn't all rosy before today's open.
Airbnb (ABNB), for instance, is down 13.7% after coming up shy of Q2 EPS estimates, tempering its Q3 guidance, and observing that it is seeing a slowdown from U.S. guests. Separately, Walt Disney's (DIS) CFO, after the company reported better-than-expected Q2 earnings, acknowledged there has been some softness in the domestic parks; and Super Micro Computer (SMCI), a favorite of the momentum AI trade, is down 13.9% after it came up well shy of fiscal Q4 EPS estimates. SMCI also announced a 10-for-1 stock split.
Elsewhere, CVS Health (CVS) topped Q2 earnings estimates, but lowered its FY24 outlook. Despite the disappointing guidance, CVS is indicated 1.5% higher in pre-market trading.
The connecting element here is that things don't feel as bad as they did just a few days ago, yet they don't feel as good as they did only a few weeks ago.
Market participants know some kind of transition is taking place. The struggle at the moment is that they don't understand the pace of that transition.
In that vortex of uncertainty, there will be increased trading volatility. That was evident yesterday when a good day turned into just an okay day.
We will have a good open today, but what comes next throughout the trading day and into the close is the more important consideration.
