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There was some dip buying yesterday, but in a fairly new twist the dip buying was counteracted by selling into the strength. The end result is that buying the dip didn't prove successful at the index level.
The underperformance of the mega-cap space had a good bit to do with that, yet the small-cap stocks continued to struggle. Following Friday's 2.9% decline, the Russell 2000 dropped another 0.8% on Monday and fell further into correction territory.
There are questions as to whether the recent selling is simply a consolidation effort for an overheated/overbought market or an emerging trend tied to concerns about weaker growth, which would not bode well in general for earnings growth.
The Treasury market is behaving of late as if it is spying growth problems. The 2-yr note yield is down six basis points today to 4.11% and down nine basis points for the month. The 10-yr note yield is down eight basis points today to 4.31% and down 24 basis points for the month.
Some more cautious-minded earnings guidance/revisions for the first quarter and full year, coupled with tariff angst, talk of increased restrictions on chip exports to China, and the uncertainty surrounding the Trump administration's efforts to cut government spending, have caused some added misgivings about the growth outlook that have tempered the stock market's enthusiasm.
There is an effort underway to try to get back on track, but it is still a half-hearted effort.
Currently, the S&P 500 futures are up five points and are trading 0.1% above fair value, the Nasdaq 100 futures are down four points and are trading roughly in-line with fair value, and the Dow Jones Industrial Average futures are up 92 points and are trading 0.2% above fair value.
Dow component Home Depot (HD) reported some better-than-expected Q4 results this morning, but issued some disappointing full-year guidance. Shares of HD, down 7.3% over the last six sessions, traded lower initially but have rebounded and are now up 0.7% in pre-market action.
That move, and a 1.6% gain in Eli Lilly (LLY) after it introduced new Zepbound vial doses at a lower cost, has helped the equity futures market stabilize a bit.
There hasn't been a full thrust of buying interest, though, as the recent price action has left participants feeling somewhat sheepish about buying into the weakness. The price action will be watched closely again today considering the stepped-up selling pressure late in yesterday's session dropped the S&P 500 below its 50-day moving average (6,008.51), which is a key, short-term technical level.
This morning's economic releases, which include the December FHFA Housing Price Index (prior 0.3%) and the December S&P Case-Shiller Home Price Index (Briefing.com consensus 4.4%; prior 4.3%) reports at 9:00 a.m. ET, and the January Consumer Confidence Report (Briefing.com consensus 103.1; prior 104.1) at 10:00 a.m. ET, will be part of today's trading mix along with the $70 billion 5-yr note auction results at 1:00 p.m. ET.
