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The futures for the major indices are indicating a modestly higher open, but based on yesterday's trade, we're not sure that is bringing much comfort to market participants. A solid open yesterday was greeted with sell-the-strength interest that culminated in the fifth straight losing session for the S&P 500 and Nasdaq Composite that was paced by weakness in the mega-cap stocks.
Currently, the S&P 500 futures are up 15 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up 73 points and are trading 0.3% above fair value, and the Dow Jones Industrial Average futures are up 116 points and are trading 0.3% above fair value.
That is one small step for the market, but it will take a giant leap for the Santa Claus Rally to come to pass.
We need a close above 5974.07 for the S&P 500 today, or a gain slightly better than 1.8%, if there is going to be a claim of a positive Santa Claus Rally period (last five trading sessions of the year and first two of the new year). More significant market downturns have tended to occur in years when Santa didn't show, but note that isn't a guarantee one will happen.
A 1.8% gain today is a tall order. There isn't any news catalyst this morning to excite the animal spirits needed to find Santa Claus. Rather, the futures market is being driven more by some obligatory buy-the-dip interest following the extended losing streak.
That interest is modest, though, probably because of some reservations about the market potentially rolling over again, so there is also a wait-and-see mentality permeating the tape at the moment. That stands to reason given the price action of late and given the understanding that a key economic report will be released at 10:00 a.m. ET.
That would be the December ISM Manufacturing PMI (Briefing.com consensus 48.5%; prior 48.4%), which is a gauge of manufacturing activity at the national level. The dividing line between expansion and contraction for this report is 50.0.
Yesterday, the market saw a round of relatively weak December manufacturing PMI readings out of China and Europe. Those readings helped put a bid in the Treasury market, but like stocks, that bid fell by the wayside during the cash session.
There is a bid once again this morning, however. The 2-yr note yield is down two basis points to 4.23% and the 10-yr note yield is down four basis points to 4.54%. The lower yields are presumably a function of buying interest on the part of foreign buyers pursuing an interest rate differential trade. The latter is a byproduct of weaker growth and more dovish-minded policy elsewhere relative to the U.S.
Notably, the euro and British pound were sold hard yesterday, fueling the jump in the U.S. Dollar Index to its highest level since September 2022. Both have rebounded modestly against the dollar today, but here again there is a wait-and-see mentality to see if the rebound action can hold or fades away.
