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The equity futures market has a rebound on its mind, yet that sentiment likely extends beyond the equity futures market.
Entering today, the major indices are down between 3.9% and 4.9% for the week and down between 8.4% and 13.6% over the last month. They have all fallen into correction territory (down more than 10% from their prior high) with the exception of the Dow Jones Industrial Average, which has dropped "only" as much as 9.8% from its prior high.
Currently, the S&P 500 futures are up 55 points and are trading 1.0% above fair value, the Nasdaq 100 futures are up 250 points and are trading 1.3% above fair value, and the Dow Jones Industrial Average futures are up 271 points and are trading 0.7% above fair value.
The narrative suggests that they are short-term oversold and due for a bounce. Of course, that same narrative applied yesterday and all the indices did was lose more ground. So, the equity futures market might have a rebound on its mind now, yet that is inconsequential to what it thinks at today's close.
What it knows is that the potential for "headline upset" is a clear and present danger, and one it hopes to avoid today. Thus far, things are going its way.
- There is a burgeoning sense that a government shutdown will be averted after Senator Schumer said he will vote for House-passed continuing resolution.
- There is speculation that China will soon provide more policy stimulus to boost domestic consumption.
- There is some easing of the US-Canada trade tension following reports of a productive meeting between Ontario Premier Ford and Sec. of Commerce Lutnick.
These items have acted as catalysts for today's buying interest, but the real catalyst is the market's oversold condition.
The latter resonates in the fact that Ulta Beauty (ULTA), which talked about consumer uncertainty and issued disappointing full-year guidance, is up 8% in pre-market trading. Coming into today, ULTA is down 14.6% month-to-date and down 27.7% since the start of the year.
Similarly, DocuSign (DOCU), which issued Q1 and full-year revenue guidance below consensus estimates, is up 11% in pre-market trading. Coming into today, DOCU is down 10.2% month-to-date and down 16.9% since the start of the year.
The dour month-to-date and year-to-date price returns can be applied to many other stocks, like NVIDIA (NVDA), which is up nearly 3% in pre-market trading.
NVIDIA's strength, and some buy-the-dip interest in other mega-cap stocks, has provided an added boost for the equity futures market, which has one economic release to digest today. It is an important one, too.
The preliminary University of Michigan Index of Consumer Sentiment for March (Briefing.com consensus 65.6; prior 64.7) will be released at 10:00 a.m. ET. This report will not only highlight how consumers feel about their personal financial situations and the economic outlook, but what their year-ahead and long-run inflation expectations are.
The indications will factor into the Treasury market's behavior and certainly in the stock market's behavior, which is looking good for now.
