EmailSomeone must have hit the reset button this morning, because the opening indication for the equity market resembles the one we saw yesterday. Granted it is not quite as strong, but if the current indication holds, the S&P 500 should start the day about 0.7% higher.
What remains to be seen is if the reset button applies only for the open or if it is for the entire trading day. If it is the latter, then a relatively weak finish is in order because what was gained early yesterday was essentially wiped out by the close.
For now, though, participants are keying off some better-than-feared manufacturing surveys out of Europe and China, as well as reports that Goldman Sachs (GS) executives, including CEO Lloyd Blankfein, did not receive individual subpoenas in connection with a Justice Department investigation of the firm's dealings with mortgage-backed securities.
Headlines yesterday afternoon that Goldman's CEO had hired a high-profile defense attorney rattled the financial sector, which paced Monday's late retreat. Essentially, then, there is a bit of a relief trade embedded in the futures indication as a worst-case scenario is being upgraded to a bad scenario.
In general, foreign markets have acted well today in response to the aforementioned manufacturing surveys.
The upside bias of European markets in particular is striking, because they could have easily buckled following a distinctly negative economic sentiment reading out of Germany. They didn't, which suggests a prevailing belief that European bourses were poised to bounce from short-term oversold conditions.
Still, Europe's gains are more modest than the ones seen in major Asian averages, as traders there are keeping their enthusiasm in check ahead of the open on Wall Street. They also remain very cognizant that there is still a good deal of uncertainty with respect to sovereign debt issues and policy prescriptions for dealing with them.
That same thought is festering for participants here, who are also anxiously awaiting the New Home Sales report for July (Briefing.com consensus 310,000; prior 312,000) at 10:00 a.m. ET, the $35 bln 2-Year Note auction results at 1:00 p.m. ET, and, of course, the much talked about speech on the economy from Fed Chairman Bernanke on Friday.
So, there is some wait-and-see thinking going on right now.
Some participants are waiting to see what today's data will bring; some participants are waiting to see if the opening gains can be sustained into the close; some participants are waiting to see how the financial stocks act today; and all participants are waiting to see what Mr. Bernanke says and how the market responds to it.
The opening indication is higher. What happens after that is anyone's best guess.
--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.
