Yesterday saw selling into the close, confirming my view that sentiment among traders is presently waning.
After the close Facebook and Microsoft beat earnings estimates handsomely, and, therefore, their shares are trading up 8% and 4% respectively in the premarket this morning. 3M (MMM) on the other hand lowered guidance, citing (like CAT yesterday) dynamics around China sales as a concern going forward.
So far over 70% of S&P 500 members have beaten Q1 bottom line estimates, roughly 50% beat on revenues.
As I type, S&P and Dow futures are in the red, suggesting a lower open; the Dow more so given MMM’s earnings miss and the attendant selloff in its shares this morning. The Nasdaq looks healthy coming into the day, boosted by the likes of FB and MSFT.
While you’d think that amid still strong internals (although breadth will suffer if the latest keeps up), breaching all-time closing highs and overall really strong earnings results that the market would be breaking out to notably higher highs; that's simply not in the cards given existing geopolitical headwinds.
Beneath the relative calm of year-to-date gains, record levels and positive earnings results, there lies the potential for huge global disruptions if trade negotiations don’t inspire the U.S. to approach its allies/trading partners in a far less antagonistic manner going forward. Which -- given the economic uncertainty that the brewing threat of a US/EU trade war (not to mention the prospects for a China deal that leaves tit-for-tat tariffs intact) engenders -- is unequivocally what has the market on edge these days.