The S&P futures are trading 0.2% below fair value. Naturally, there is a scramble to fit the headlines with that negative bias.
It is an easy fit today, too.
China took steps to curb speculation in its residential property market. Italy still has been unable to form a coalition government. The U.K. saw a construction PMI reading (46.8) that was the lowest since October 2009. And the $85 bln sequestration is now in effect with the White House and Congress unable to agree on a better plan for cutting government spending.
None of those headlines is particularly encouraging and yet the S&P futures are down just 0.2%, which tells us market participants are not making a mountain out of molehill headlines.
That may be because there isn't a lot of "new" news in today's leading headlines.
Market participants knew last Friday, when the S&P 500 increased 0.2%, that Italy's political situation is a mess. It knew the U.K. economy is weak. It knew the sequester was going to happen. It even knew there was talk in China about taking steps to slow the appreciation of home prices.
Chinese investors clearly didn't like the tightening measures. The Shanghai Composite declined 3.7%. That pretty much set the tone for regional markets, with the exception of course of Japan where the Nikkei rose 0.4% as the nominee for governor of the Bank of Japan, Haruhiko Kuroda, endorsed the need for aggressive monetary easing.
Closer to home, Fed Governor Yellen said this morning that she sees no current costs to quantitative easing that would prompt her to curtail the buying program. That admission, along with a Bank of America/Merrill Lynch upgrade of Merck (MRK) to Buy from Neutral and Warren Buffett's declaration that he is still buying stocks because he thinks he is getting good value for them, has provided a helpful measure of support.
There isn't any economic data in the US today, but the February employment report lurks at the end of the week.
We saw the market shake off early losses on Friday and close higher, led by the defensive-oriented health care sector (+0.8%), which is also the best-performing sector year to date (+9.3%).
The leadership of that sector is peculiar in what is reportedly a risk-on market. In the Big Picture column published today, we made note of that leadership and some other interesting trading currents in the month of February that didn't exactly fit with a no-holds-barred bull market.