Stocks are falling slightly this morning after another strong performance yesterday.
S&P 500 futures are down by about 0.1 percent, while European indexes are posting slightly larger declines. Most Asian markets advanced in the overnight session, led by a 1.45 percent gain in Tokyo.
The S&P 500 is already up almost 10 percent so far this year, propelled by strong economic data and benign political climates in the United States and Europe. It's also being aided by a major rally in Japan, which is showing signs of emerging from a bear market that's lasted for more than two decades.
There are other fundamental reasons for the strength in addition to the macro backdrop. Financials remain arguably undervalued after recovering from the 2008 mortgage crisis. The U.S. energy sector is also in the midst of a renaissance, giving a tailwind to the manufacturing sector. Small caps and transport stocks have broken out to all-time highs.
Investors now face the quandary of whether to chase stocks at long-term highs or to wait for pullbacks, which so far have been shallow and short-lived. Headlines today will focus on consumer prices and industrial production before the opening bell, followed by consumer sentiment at 9:55 a.m. ET. The calendar is more active next week, with German data and the Federal Reserve's interest-rate announcement.
Commodities are modestly bullish this morning. Oil is up about 0.5 percent while natural gas is higher by 1.5 percent, following bullish option activity in domestic producers including Exco Resources and Ultra Petroleum in recent days. Metals are posting small gains, but agricultural foodstuffs are mixed. Foreign-exchange is painting a similar picture, with the euro climbing against the U.S. dollar and the Japanese yen.
In company-specific news, retailer Aeropostale is down by about 7 percent after issuing a weak forecast for the current quarter. Boeing is inching higher after announcing that battery changes will allow its Dreamliner to return to service within a matter of weeks rather than months.
Financials will also be active after the Federal Reserve announced results of stress tests last night. Bank of America fared the best, allowing it to buy back common and preferred shares. BAC is up about 4 percent on the news. JP Morgan and Goldman Sachs are lower after being told to improve their capital plans.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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