There is a lot of news in the mix this morning. Some of it is good. Some of it is bad. The sum of things, though, is that the futures market is presaging a modestly higher open for the major indices.
Goldman Sachs (GS) and Bank of America (BAC) have been sources of support after both companies exceeded top and bottom-line consensus estimates for the fourth quarter. Shares of Dow component Goldman Sachs are trading 3.3% higher while shares of Bank of America are trading 5.2% higher.
Several other financial companies reported their results this morning, including BlackRock (BLK), which came up short of consensus earnings estimates.
Still, the market remains swayed by the positive news, like an upbeat earnings report from United Continental (UAL) and a $22 billion all-stock offer from Fiserv (FISV) to acquire First Data (FDC), and not the negative news.
To that end, it isn't reeling from a fourth quarter warning issued by Ford (F), a relatively disappointing holiday sales update provided by Nordstrom (JWN), the continuation of the partial government shutdown, or the political maelstrom in the UK after Prime Minster May's Brexit plan was soundly defeated, inviting a no-confidence vote later today.
It's fair to say that the no-confidence vote in the U.S. stock market in December has been supplanted with a vote of confidence in early 2019.
Entering today's session, the S&P 500 is up 4.1% this month and up 11% since its low on December 24. The price action reflects confidence in a panoply of views:
- The U.S. economy might be slowing, but it isn't going to suffer a recession.
- The market got too pessimistic in discounting lower earnings growth.
- The slowdown unfolding in China and the U.S. will motivate both countries to get a trade deal done by March 2.
- The "Fed put" has been resuscitated, evidenced by Fed Chair Powell's vocal pivot to watching market signals closely and embracing a more patient-minded approach to monetary policy.
That is the thought process that has gotten the stock market here. Because the stock market got here a lot faster than many thought possible is one reason why it keeps flexing some muscle in the face of some atrophic news. Simply put, the speed of the rebound has fueled a fear of missing out on further gains.
The stock market may be overbought on a short-term basis, but it has yet to throw off any signals that there is a first-mover advantage in selling into the strength.
Thus far, the leadership has been convincing with the communication services, industrials, energy, consumer discretionary, and financial sectors outperforming; the intraday dips continue to be bought; and the willingness to dismiss bad news as already being priced in has persisted.
The trend, then, has returned to being the friend of market bulls who have yet to be swayed into thinking that they should rethink things.
That will change inevitably because the stock market can't rise in a straight line indefinitely, but the price action has yet to turn the tide of sentiment.
In the same vein, the Import and Export Price Index for December hasn't turned the tide with respect to the market's view that inflation pressures overall remain in check.
Import prices declined 1.0% month-over-month and were down 0.6% year-over-year. Excluding fuel, they were unchanged in December and up just 0.5% year-over-year. Export prices declined 0.6% and were up 1.1% year-over-year. Excluding agricultural products, they were down 1.1% in December and up 1.0% year-over-year.
The key takeaway from the report is that it didn't ring any inflation alarm bells that would compel the Fed to be less patient with its monetary policy approach.