It looked as if the major indices were headed for a loss yesterday, albeit a modest one, but in emblematic fashion, there was a surge of buying interest in the closing minutes that left them all with a modest gain for the day. To be sure, it was a fitting end to another month that defied the expectations of short sellers and anyone sticking to the sidelines.<\/p>\n\n\n\n
The month of August is now straight ahead and it looks poised to start on a soft note.<\/p>\n\n\n\n
Currently, the S&P 500 futures are down 22 points and are trading 0.5% below fair value, the Nasdaq 100 futures are down 97 points and are trading 0.6% below fair value, and the Dow Jones Industrial Average futures are down 116 points and are trading 0.3% below fair value.<\/p>\n\n\n\n
The party line coming into the month is much the same: the stock market looks overbought on a short-term basis and is due for a pullback.<\/p>\n\n\n\n
That’s the party line. It doesn’t mean the stock market will get in line with that line, but that’s the prevailing driver of the weakness in the equity futures market this morning. Another driver that will be monitored carefully is the behavior of the 10-yr note. At the moment, it is a little unruly.<\/p>\n\n\n\n
The 10-yr note yield has moved back above 4.00%, currently up five basis points to 4.01%. The move above 4.00% is stirring some angst about lofty equity valuations and competitive headwinds for stocks, which in turn is providing a rationale to curtail buying efforts for the time being.<\/p>\n\n\n\n
Better-than-expected results from Dow components Caterpillar (CAT)<\/strong> and Merck (MRK)<\/strong>, though, along with Uber (UBER)<\/strong>, which reported the first GAAP profit in company history, have kept some buyers in the mix.<\/p>\n\n\n\n