It is another morning where the trading in the equity futures market is tentative. Currently, the S&P 500 futures are up three points and are trading 0.1% above fair value, the Nasdaq 100 futures are up four points and are trading 0.1% above fair value, and the Dow Jones Industrial Average futures are up three points and are trading in-line with fair value.
Some of the market’s restraint is predicated on a belief that the mega-cap stocks are due for a pullback and will exert some overriding pressure on the major indices just as they have exerted overriding aid to this point.
The latter point notwithstanding, the mega-cap stocks showed some resolve to selling interest in yesterday’s trade, which lent a small measure of support to a market that was favoring cyclical/value plays. The strength seen in the broader market enabled the S&P 500 to log its highest closing level (4,283.85) since last August, although it continues to hold below 4,300.
It will take a close above 4,305.20 to take out the highest closing level since last August, so market participants’ eyes are trained on levels just as much as they are trained on the price action of individual stocks.
There is a good bit of price action this morning in smaller stocks like Dave & Buster’s Entertainment (PLAY), Couchbase (BASE), United Natural Foods (UNFI), Casey’s General Stores (CASY), and Yext (YEXT) following their earnings reports, but big moves in a handful of small stocks don’t move the market like big moves (or even small moves) in a handful of mega-cap stocks do.
On a related note, some pre-market strength in Tesla (TSLA), which is up 3.1%, NVIDIA (NVDA), which is up 0.4%, and Alphabet (GOOG), which is up 0.1%, has helped offset modest losses in other mega-cap stocks and has helped hold the line so to speak for the equity futures market.
Some trade data, though, has also helped hold the line on a guarded view of global economic growth prospects. China led things off overnight with a weaker-than-expected 7.5% year-over-year decline in May exports and the U.S. followed suit with a trade balance report for April that also showed a drop in exports.
Specifically, the U.S. trade deficit widened to $74.6 billion in April (Briefing.com consensus -$75.3 billion) from an upwardly revised $60.6 billion (from -$64.2 billion) in March, which was recalculated with annual revisions to the goods and services series.
The widening deficit in April was the result of exports being $9.2 billion less than March exports and imports being $4.8 billion more than March imports.
The key takeaway from the report is the drop in exports, which reflects weakening demand abroad for U.S. goods.
Equity futures took the trade news in stride, which is to say it did little in its wake, which is also to say that one shouldn’t expect a big wake as the market gets going today without much of a motor to speed things along.
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Originally Posted June 7, 2023 – Tracking for a subdued start
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