US markets to open lower with investors complacent about a pullback

After a bit a non-event yesterday where stocks spent most of the day lower barring a late surge in some technology names, US markets look set to open lower today with another day of low volatility expected. Futures suggest the S&P500 will open 3 points lower at 1,947 with the Dow Jones expected to open 21 points lower at 16,924. eBay lost out to Facebook yesterday as the Paypal CEO switched companies but overall internet tech stocks did well with Apple, Twitter and LinkedIn all trading higher. The re-emergence of tech stocks as the out-performers highlights the complacency in the market at the moment. The complacency is one tempered with some caution though. The belief appears to be there will in the near future be a small correction, perhaps of 5% in the S&P 500. So the approach is one of riding out any correction with current holdings and adding to it on the dip rather than at the highs. This less aggressive attitude can been seen by the decrease in margin debt in March and April. Other than investor beliefs over the state of markets, one of the reasons given for the low volatility is more structural; the increased regulation over trading at banks. Banks have clearly been pulling back from proprietary trading, particularly in commodities and FX where regulatory scrutiny and risks of fines over manipulation has been the highest. Most trading at banks is typically flow trading, ie facilitating the trading of others so while banks obviously encourage flow from clients, the demand still needs to be there. The slower demand from clients for trading is the bigger cause than any regulatory effect. H&R Block are expected to report earnings of $3.23 per share on revenue of $2.49bn. CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.