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The stock market enjoyed a broad-based advance on Friday, rebounding from a recent bout of selling pressure that sent the Santa Claus Rally packing this year. Notably, the S&P 500 closed a whisker shy of its 50-day moving average.

Based on the activity in the equity futures market, the S&P 500 will be looking down on that key technical level when trading begins. Currently, the S&P 500 futures are up 45 points and are trading 0.8% above fair value, the Nasdaq 100 futures are up 231 points and are trading 1.1% above fair value, and the Dow Jones Industrial Average futures are up 234 points and are trading 0.5% above fair value.

Several variables are behind this positive bias:

• There is tax policy enthusiasm with President-elect Trump pushing for the passage of a single reconciliation bill that would include extending the 2017 tax cuts. According to Politico, Speaker Johnson (R-LA) said it is his goal to have that bill passed into law by the end of April.
• There is AI enthusiasm after Foxconn reported a 15% yr/yr increase in record Q4 revenues.
• Mega-cap stocks are trading higher and there is some fear of missing out on further gains there.
• Global growth prospects got a boost following the report of better-than-expected final Services PMI readings for December out of China and Europe.
• The U.S. dollar is losing steam in a counter-trend trade from an overbought condition, taking a little pressure off the multinational stocks whose earnings prospects are challenged by a stronger dollar. The U.S. Dollar Index is down 0.9% to 107.98.

The Treasury market so far doesn't appear to be getting in the way of the equity rally effort, but participants will be keeping a close eye on the action there, which can be described as a bit squirrelly today.

Yields pressed higher overnight, but then recovered in the wake of some encouraging Services PMI readings out of Europe and press reports that Trump aides are exploring a universal tariff for critical imports. One might think the opposite would occur (i.e., yields going up) after those items. Currently, yields are little changed across the curve from Friday's settlement, yet they are off their lows of the morning.

The 2-yr note yield is down one basis point to 4.27% and the 10-yr note yield is up one basis point to 4.61%.

This will be a big week for the Treasury market, which will also be asked to digest a $58 billion 3-yr note auction today, a $39 billion 10-yr note reopening on Tuesday, and a $22 billion 30-yr bond reopening on Wednesday alongside the December ISM Services PMI on Tuesday and the December Employment Situation Report on Friday.

The thrust of the equity market's rebound effort will likely ultimately rest on the thrust -- or lack thereof from this point -- in Treasury yields.

--Patrick J. O'Hare, Briefing.com

(Editor's note: original comment has been corrected to indicate the 10-yr note reopening will be Tuesday and the 30-yr bond reopening will be Wednesday)