Starting this past Friday, the narrative that has taken control of the market is that fears of an economic slowdown are driving an inversion of the yield curve. This has been the primary explanation for the market action.
With overseas markets trading up and U.S. indices indicated higher Tuesday morning, the narrative is that the growth concerns are easing and the inversion of the yield curve isn't such a big deal. It helps that oil is trading higher -- which is attributed, in part, to increased economic demand.
Several analysts, including Goldman Sachs (GS) , have pointed out that the proportion of the yield curve that is inverted is fairly small. In addition, the inversion is being driven by factors outside the U.S. Several Fed members have stated that the inverted yield curve has given off false readings of a recession in the past -- and former Fed Chair, Janet Yellen, said it was an unreliable signal, as well.
If the yield curve inversion continues or expands, the market is going to worry about it again, but those concerns have been set aside for now. The market is shifting its focus to other matters -- such as some target increases for Apple (AAPL) following its new product event yesterday.
The market didn't react much at all on Monday to the Mueller Report, despite the uproar in the political media. The battle continues and the only real market issue that seemed to arise is whether or not the finding of no Russian collusion might impact President Trump's stance when it comes to negotiating with China on a trade deal. Some pundits theorized that he would now be more confident and might be more inclined to be tougher in the negotiations.
We will see what happens, but there should be some headlines about China trade later this week as negotiations continue. The risk of a positive headline is probably greater than a negative headline and will likely keep the bears at bay.
The softness of the last couple of days has created some better entry points -- and that did help to encourage a little speculative action Monday. Small caps (IWM) outperformed and breadth wasn't bad, despite the weak action in financials and banks.
There were mixed reactions to Apple on Monday that kept things contained, but there is some bullish spin from analysts today -- and the potential for significant revenue from a credit card and content is seen as pragmatic, even though it doesn't seem in keeping with the legacy of Steve Jobs.
Growth fears have eased, the inverted yield curve issue is set aside, China trade will be an issue again soon and market players are looking to put cash to work.