EmailThe mechanics of Thursday's trade looked similar to what has been seen throughout the week (i.e. light volume and paced by technical factors), yet the outcome was different in that the S&P 500 registered a gain, albeit a modest one.
The 0.3% advance was certainly better than previous sessions, but knowing the S&P 500 was up 1.1% at its high for the day made the final stand look somewhat disappointing to many, especially since the bulk of economic data released yesterday was better than expected.
From our vantage point, a gain is a gain, just as a win is a win no matter how small the final margin.
Now, it's on to the next contest -- and it currently looks good for the cash market on this quarterly options expiration day.
The S&P futures are trading 0.9% above fair value, bolstered by an improved showing in eurozone bond markets (Italy, Spain and France in particular), word once again that congressional leaders have reached a tentative agreement on a spending bill to fund government operations, and an expectation of some bargain-hunting efforts following this week's losses.
Strikingly, the market appears to be paying little attention to Fitch Ratings downgrading eight global banks, including Bank of America (BAC), Barclays (BCS), Deutsche Bank (DB), Citigroup (C), and Goldman Sachs (GS). The non-response is essentially the equivalent of saying "tell us something we don't already know."
On a related note, there have been rumors of an imminent downgrade coming for one or more eurozone sovereigns, yet the strength today in eurozone bond markets, which many think is a function of ECB buying, seems to be a factor mitigating concerns on that matter.
The market also digested the latest CPI report with relative ease.
Consumer price inflation was unchanged in November (Briefing.com consensus +0.1%), according to the Bureau of Labor Statistics, while core CPI, which excludes food and energy, increased 0.2% (Briefing.com consensus +0.1%).
A 1.6% decline in the energy index kept overall inflation in check in November, but increases in the indexes for shelter, medical care, apparel, and personal care were responsible for the bump in core CPI.
On a year-over-year basis, total CPI is up 3.4%, which is down slightly from 3.5% in October; meanwhile, the core rate is up 2.2%.
The inflation data are not going to excite the Fed or alter the market's thinking on the current and projected course for monetary policy. That is perhaps why there was little change in the futures market following the release of the CPI report.
The question on traders' minds at this juncture is, can the market sustain and extend its opening gains or will today be another day for selling into strength?
We can't say for certain, although the trend of late has been to watch the dollar and to sell into its strength. On that note, the U.S. Dollar Index is currently down 0.3%.
--Patrick J. O'Hare, Briefing.com
Patrick J. O'Hare is Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.
