The stock market is acting a bit fatigued. That is understandable given the steady drumbeat of news, not just since yesterday’s close with tons of earnings results, but over the course of the past few weeks that have featured a steady drumbeat of market-moving news items with binary trading effects.
Earnings, inflation, the economy, geopolitics, Fed policy… these have been the headline drivers. They have stung at times and soothed at others.
Lately, there has been more soothing, principally because forward 12-month earnings estimates have gone up while market rates have come down. That combination has enabled the stock market to bloom in May after some April showers.
There are no flowery indications this morning, however.
Currently, the S&P 500 futures are flat and are trading in-line with fair value, the Nasdaq 100 futures are up seven points and are trading fractionally above fair value, and the Dow Jones Industrial Average futures are down 63 points and are trading 0.1% below fair value.
These indications are improved following an initial weekly jobless claims report that was worse than expected (a page out of the market’s playbook that says bad news is good news).
For the week ending May 4, initial jobless claims increased by 22,000 to 231,000 (Briefing.com consensus), which is the highest count since last August. Continuing jobless claims for the week ending April 27 increased by 17,000 to 1.785 million.
The key takeaway from the report is the jump in initial claims, which will be construed as a sign of softening in the labor market. That view, in turn, will be construed as a possible trigger for a Fed rate cut in coming months.
The Treasury market was quick to respond in that direction. The 2-yr note yield, at 4.84% just before the release, is at 4.81%, down three basis points from yesterday. The 10-yr note yield, at 4.51% just before the release, is at 4.48%, down one basis point from yesterday.
Those moves uplifted an equity futures market that was running low on energy, processing a slate of earnings news that included some less-than-robust results and/or guidance from the likes of Arm Holdings (ARM), Airbnb (ABNB), Planet Fitness (PLNT), Warner Bros. Discovery (WBD), and Roblox (RBLX).
Other news included China reporting some better-than-expected import and export data for April, the Bank of England voting 7-2 to keep its official bank rate unchanged at 5.25%, and President Biden telling CNN that the U.S. won’t send Israel offensive weapons for use in any attack on Rafah.
So, there you go — in those last two sentences alone, there is earnings, economic, monetary policy, and geopolitical news of note to keep the spin cycle going and the market tracking with a tired feel that is the result of being tossed back and forth by the news cycle.
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Originally Posted May 9, 2024 – A tired feeling
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