There may not be a lot of life in the equity futures market at the moment, but that doesn’t mean the equity market is dead. No, it’s more like it is resting following a string of 15 gains in the last 17 weeks for the S&P 500 and Nasdaq.
Currently, the S&P 500 futures are up four points and are trading 0.1% above fair value, the Nasdaq 100 futures are up 24 points and are trading 0.1% above fair value, and the Dow Jones Industrial Average futures are up 13 points and are trading fractionally above fair value.
That’s a setup for a relatively flat open, and it is also a reflection of a wait-and-see attitude that has been seen often in the futures trade as everyone seems to be waiting for the equity market to get reined in. Of course, what has also been seen just as often is an equity market that keeps running.
That remarkable feat of endurance, then, has gotten plenty of participants chasing after it, fearful of missing out on further gains, particularly in the mega-cap stocks.
So, today looks no different. Participants are waiting to see how the price action unfolds in the cash market to determine if this will be a full day of rest or another day that makes sidelined investors restless at the sight of continued gains.
Berkshire Hathaway (BRK.B) and Domino’s Pizza (DPZ) are among the individual gainers of note in the early going following their earnings results. BRK.B is up 2.0%, which will give a boost to the financial sector, and DPZ is up 7.0%, which will give a boost to the consumer discretionary sector.
Recall that today is the day that Walgreens Boots Alliance (WBA) is being booted from the Dow Jones Industrial Average. Amazon.com (AMZN) is taking its place in the price-weighted average. In turn, Uber (UBER) is entering the mix today as a component of the Dow Jones Transportation Average, replacing JetBlue Airways (JBLU).
Also, Dow component Walmart’s (WMT) 3-for-1 stock split is effective today.
Other items that will be “in effect” as the day progresses include the January New Home Sales Report at 10:00 a.m. ET (Briefing.com consensus 690,000; prior 664,000) and not one, but two, Treasury auctions. There is a $63 billion 2-year note auction at 11:30 a.m. ET and a $64 billion 5-year Treasury note auction at 1:00 p.m. ET.
The auction results will be closely monitored given last week’s poor 20-yr bond auction and the understanding that the 2-year note is more sensitive to changes in the fed funds rate.
On a related note, there will be an ample fixation this week on the thought of when the target range for the fed funds rate might change. That’s because the Fed’s preferred inflation gauge — the core-PCE Price Index — will be released Thursday in conjunction with the January Personal Income and Spending Report.
That will be then, but for now, eyes will be fixed on today’s price action.
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Originally Posted February 26, 2024 – A day of rest or more restlessness?
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