There is a bid in the equity futures market this morning, which is nice; however, the manner in which the stock market opens isn’t as relevant as the manner in which it closes.
The S&P 500 has suffered five straight, losing sessions and is trading below its 200-day moving average (4,236). There is a reasonable expectation that the S&P 500 would see a rebound attempt. Then again, there was a similarly reasonable expectation for a rebound attempt yesterday, as the 10-yr note yield fell from 5.02% to 4.84%, and yet the S&P 500 ended up with another loss.
It wasn’t a big loss, but that’s only because there was some relative strength in the mega-cap stocks. Remove their outsized influence from the equation and one gets a better sense, with the equal-weighted S&P 500 having declined 0.6%, that it wasn’t a particularly good day yesterday even with the drop in yields.
Currently, the S&P 500 futures are up 24 points and are trading 0.6% above fair value, the Nasdaq 100 futures are up 84 points and are trading 0.7% above fair value, and the Dow Jones Industrial Average futures are up 160 points and are trading 0.5% above fair value.
This is not a vacuous move, however. There has been a slate of good earnings news from blue-chip companies.
Coca-Cola (KO), 3M (MMM), General Electric (GE), Verizon (VZ), Kimberly Clark (KMB), Dow, Inc. (DOW), General Motors (GM), Halliburton (HAL), RTX Corp. (RTX), Danaher (DHR), and Sherwin-Williams (SHW) all topped earnings expectations.
That is a constructive sequence for the stock market, which is eyeing earnings reports after the close from Microsoft (MSFT) and Alphabet (GOOG), both of which are trading higher in pre-market action.
Their gains, gains in other mega-cap stocks, and talk of stimulus efforts in China have helped underpin the equity futures trade in front of the cash open.
Of course, it isn’t all good. The Israel-Hamas War remains laced with heightened uncertainty, preliminary October manufacturing and services PMI readings for the eurozone showed a continued contraction in business activity, and the House GOP is still running in circles trying to elect a Speaker.
Treasury yields, fortunately, are behaving themselves, relatively speaking. The 2-yr note yield is up two basis points to 5.08% and the 10-yr note yield, which saw 4.80% in overnight trading, is up one basis point to 4.85%. There is a $51 billion, 2-yr note auction today that will draw its fair share of attention. The results of that auction will be released at 1:00 p.m. ET.
For now, the stock market’s attention is fixed on a higher open and trying to fix what has been broken the past five sessions and most of the last 11 weeks. Entering today the S&P 500 is down 8.1% since the end of July.
—
Originally Posted October 24, 2023 – Trying to fix what is broken
Disclosure: Interactive Brokers
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Briefing.com and is being posted with its permission. The views expressed in this material are solely those of the author and/or Briefing.com and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Join The Conversation
If you have a general question, it may already be covered in our FAQs. If you have an account-specific question or concern, please reach out to Client Services.