US stock futures sitting out Trump's celebration of Mueller report

[NEW YORK] For investors with a lot on their minds, the decision to forgo an obstruction case against President Donald Trump meant deescalation in a drama that has been capable of breeding volatility in equities.

Whether it's enough to kick life into an ascent that gave evidence of tiring last week in the face of a slowing global expansion is a separate question. For now, futures were showing zero reaction to the news, with S&P 500 contracts unchanged at 7:19pm in New York on Sunday.

Attorney General William Barr said in a letter to Congress on Sunday that Special Counsel Robert Mueller found no evidence of collusion with Russia in the 2016 presidential campaign. While Mr Mueller failed to exonerate Trump on obstruction of justice, Mr Barr said he didn't find enough evidence to pursue that charge.

"For now, just for now, this should be a market positive," said Quincy Krosby, chief market strategist at Prudential Financial Inc., which has about US$1.4 trillion in assets under management. "For this issue that has been hovering for the last two years - and mind you, the market has made new highs during that time - it helps to reduce the uncertainty, at least for now."

Mr Trump's legal entanglements have been a lesser entry in the list of market irritants that have periodically arisen to torpedo a US bull market that entered its 11th year in early March. Others remain, including the president's trade war with China, anxiety about Federal Reserve policy and signs growth is slowing globally.

Investors were divided on whether the latest news would fuel lasting gains.

"This removes one big impediment," Tim Ghriskey, chief investment strategist at Inverness Counsel LLC, said by phone. "It means that there is the possibility of an infrastructure bill, a functioning government, further easing on regulation of financial institutions. It theoretically removes this distraction."

Said Kristina Hooper, chief global market strategist at Invesco: "I don't think the Mueller report ever really mattered to markets. If anything, it is a slight positive as it illuminates one contributor to economic policy uncertainty - but, to be clear, that is just one of many contributors to uncertainty."

Said Kevin Smith, founder and CEO of Crescat Capital: "I could see a significant initial positive move but believe it will be fleeting. For example, Trump's hyping of the China deal failed to boost the market on Friday where that had worked repeatedly in the past. So, maybe the market is ready to be less driven by Trump news and more by economic reality."

Said Art Hogan, the chief market strategist at National Holdings Corp: "The Mueller report has been a potential headwind for this market for two years. The report has lived in the bizarre world of always being right around the corner. The potential for the findings of the report to be disruptive to markets have always been a given."

Stocks have had an explosive run since Trump's election in November 2016, returning 37 per cent with dividends for an annualized rate that is roughly double the historical average. The president's overhaul of corporate taxes contributed to one of the best years for earnings since the bull market began, with profits for S&P 500 companies rising more than 22 per cent in 2018.

Mr Trump celebrated Sunday's news. "It's a shame that our country had to go through this," Mr Trump told reporters before he departed Palm Beach, Florida, to return to the White House. He called Mueller's probe an "illegal take-down that failed."

At the same time, the equity benchmark plunged 14 per cent in its last full calendar quarter, the worst since 2011, and price turbulence as measured by the Cboe Volatility Index currently sits about 10 per cent above its five-year average. Of particular concern to stock bulls was last week's reception to more dovish emanations from the Federal Reserve. The S&P 500 ended down for the week and had its biggest drop in three months on Friday.

"The markets are focused on the slowing global economy right now," said Michael O'Rourke, JonesTrading's chief market strategist. "It is still too early and too few details are out for the market to meaningfully react. Regardless, Washington is mired in a state of political gridlock which won't be resolved until the next presidential election."

Democratic lawmakers have demanded Mr Mueller's full report as well as the underlying evidence so they can pursue their own investigations. Representative Jerrold Nadler, chairman of the House Judiciary Committee, emphasized in a tweet that Mr Mueller didn't exonerate Mr Trump and pledged to call Mr Barr to testify.

BLOOMBERG