For years, the market has worried about the potential for government shutdowns due to their inability to reach an agreement over raising the debt ceiling. In a surprising show of bipartisanship, Treasury Secretary Steven Mnuchin and Speaker of the House, Nancy Pelosi, have worked out a deal to lift restrictions on federal spending and pushed back the debt ceiling problem until 2021.
This is particularly positive for defense spending and helps to eliminate a shorter-term distraction, but some deficit hawks may question whether it really is a good thing that even the Republicans have given up on trying to control spending.
In addition to the debt ceiling issue, the market is reacting favorably to news that Mnuchin and Lighthizer are planning to meet with their Chinese counterparts in Beijing next week. There has been no confirmation yet of this report in the South China Morning Post, but the market is anticipating an announcement.
While there were no major earnings reports last night, the reports were generally positive with no major blowouts. Today is the heaviest reporting day of earnings season so far, with Chipotle Mexican Grill (CMG) , after the close, being one of the more interesting.
The market is reacting positively to the news flow this morning but it is a bit of a "don't short a dull market" reaction. Strength recently has been narrow, with semiconductors helping, but mostly strength in Apple (AAPL) and Microsoft (MSFT) holding things up. News that Apple may be interested in Intel's (INTC) modem business is helping the cause this morning.
The Fed interest rate decision is looming and that remains the single most important issue in this market right now. A quarter-point cut is well anticipated. So far, the fears of a gloomy earnings season have not materialized, but most of the big guns have not yet reported. Expectations have risen, especially for Apple, and that could cause some eventually issues.
Stocks are off to a solid start this morning, but what this market needs is more energy and broader participation.