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There is a solid bid in the equity futures market. Why that is remains a bit of a mystery considering some of the more prominent headlines that are on display to begin the new trading week.
Specifically, President Trump announced 25% tariffs on steel and aluminum imports; China's retaliatory tariffs take effect today; President Trump said he will announce "reciprocal tariffs" later this week on all countries with a tariff on U.S. imports; and Senator Andy Kim (D-NJ), according to NBC News, said Democrats might shutdown the government in order to oppose President Trump's agenda.
None of that has rattled the equity futures market. Currently, the S&P 500 futures are up 34 points and are trading 0.6% above fair value; the Nasdaq 100 futures are up 181 points and are trading 0.9% above fair value, and the Dow Jones Industrial Average futures are up 249 points and are trading 0.6% above fair value.
There is a Pavlovian feel to the market this morning. To wit: when the closing bell rang Friday, the major indices were down between 1.0% and 1.4%, and that sound -- and those losses -- presumably triggered the buy-the-dip crowd that is driving the action this morning.
It's not the Treasury market. Things are pretty much unchanged there after yields rose appreciably in the wake of the January employment report released Friday along with the inflation expectations data as part of the February University of Michigan Consumer Sentiment Index. The 2-yr note yield sits at 4.27% and the 10-yr note yield sits at 4.49%.
Inflation expectations will be in focus again today when the New York Fed releases its Survey of Consumer Expectations at 11:00 a.m. ET. As a reminder, the December survey showed median inflation expectations unchanged at 3.0% at the one-year-ahead horizon, 3.0% at the three-year-ahead horizon, and 2.7% at the five-year-ahead horizon.
This survey has the potential to be a market mover when it is released based on how the Treasury market responds to what it sees in the release.
In the meantime, some bullish allowance has been allowed for the earnings reports from Dow component McDonald's (MCD), industrial automation company Rockwell Automation (ROK), and cloud software company Monday.com (MNDY), which are up 1.2%, 7.0%, and 24.0%, respectively.
There seems to be a healthy allowance, too, for the expectation that the stock market will quickly bounce back from last week's losses like it always has on its bull market jaunt to record highs.
Call it the price-action effect, which we have referenced before.
Think of it as the trend is your friend (until it isn't), which we have discussed before.
The open will go the way of the buy-the-dip crowd, which doesn't seem destined to go away until they are broadsided with broad price action that doesn't go their way because of a fundamental catalyst.
