The U.S. equity market continued to be a picture of resilience, able to overcome early weakness to end Thursday with a modest gain.  That marked the seventh gain in the last eight sessions and left the S&P 500 up 1.4% for the week and 3.0% year-to-date.

The early indication this morning is that the S&P 500 will start the day on the defensive.  The S&P futures are trading 0.6% below fair value.

Some reports have attributed the negative disposition (which isn't all that negative) to the tepid demand at Italy's bond auction today and to the JPMorgan Chase (JPM) earnings report, which failed to meet consensus expectations.

Neither of those factors, however, have presented truly adverse connotations.

First off, Italy sold EUR 4.75 bln of bonds due in 2014 and 2018, above an indicated range of EUR 3-4 bln.  The sticking spot for some reportedly is that the bid-to-cover ratio for the 3-year on-the-run issue was just 1.22 versus 1.36 at the prior auction. 

Demand softened a bit, but the prevailing points are this: (1) the average yield of 4.83% was down notably from 5.62% at the prior auction and (2) Italy sold more debt than indicated.

Falling yields and raising more funds is all that can be hoped for when it comes to these auctions.  In the end, the demand, while soft, was there.  When the bid-to-cover ratio falls below 1.0 is when demand worries become more pressing.  For now, 4.83% on 3-year debt looks pretty good for Italy when yields were above 7.00% only a few months ago.

In terms of JPMorgan's report, the banking giant reported a GAAP profit of $0.90 per share for the fourth quarter, two cents below the Capital IQ consensus estimate.  Results were boosted by a reduction in loan loss reserves, which shouldn't be seen as a bad thing since it speaks to improving credit quality -- an important signal for banks that can lead to less restrictive underwriting standards.

On a related note, CEO Jamie Dimon noted that loan growth is coming from all geographies and industries.

Investment banking activity was weak, but everyone already knew that.  Mr. Dimon would be the first to admit that there is ample room for improvement in the overall business; however, JPMorgan's balance sheet strength and strong deposit growth have the bank in a very good competitive position in a tough environment.

Shifting gears, the U.S. trade deficit widened to $47.8 bln in November from an upwardly revised $43.3 bln (from -$43.5 bln) in October.  The Briefing.com consensus expected the deficit to widen to only $44.0 bln.

The change in November was the result of exports being $1.5 bln less than in October and imports being $2.9 bln more.  The drop in exports was led by a $900 mln decline in exports of nonmonetary gold while the jump in imports was paced by a $2.7 bln increase in imports of crude oil and petroleum products.

The headline number here was disappointing, but not as much as it appeared at first blush considering nonmonetary gold accounted for much of the drop in exports.  In other words, the November trade balance report does not validate the idea that there has been a broad and marked slowdown in global trade.

The widening deficit will likely drag down economists' forecast for net exports; however, with the average real trade deficit in the fourth quarter ($45.769 bln) still below the average for the third quarter ($45.999 bln), net exports should still be seen as contributing positively, albeit slightly, to Q4 GDP.

--Patrick J. O'Hare, Briefing.com

Patrick J. O'Hare is Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.