Dec 17, 2021
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“We must take the current when it serves, or lose our ventures.” – William Shakespeare
It’s red all over the screen this morning as equity futures, treasury yields, cryptocurrencies, and commodities are all lower. The only thing higher it seems is COVID case counts. Market sentiment certainly doesn’t feel jolly as Christmas is barely a week away. One positive trend worth noting, however, is that South Africa is reporting that the hospitalization rate for the latest Omicron wave of COVID has been much less than at the same point in the Delta wave, so hopefully, that’s a trend that continues over there and here in the US as the variant takes hold.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
The Nasdaq and Consumer Staples have followed divergent paths over the last month with the Nasdaq down close to 5% while Consumer Staples have rallied nearly 5%. With a performance spread of nearly 10 percentage points between the two, the gap is the widest in the Consumer Staples sector’s favor that it has been in since March of this year, and besides that the only other times in the last ten years that the spread got this wide were in August 2011, October 2018, and March 2020.
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Dec 16, 2021
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“No one goes there nowadays, it’s too crowded.” – Yogi Berra
Sentiment towards the market may be negative these days, but that hasn’t stopped the S&P 500 from quietly hanging around right at record highs. As Yogi Berra would say, “Everyone is selling stocks because they’re going up so much.”
Futures are staging a relatively impressive follow-through this morning in the wake of yesterday’s FOMC meeting where Powell and company didn’t give the market any surprises. To maintain those gains, though, we have a lot of economic data to get through. Already released were Jobless Claims (slightly higher than expected), Housing Starts (better than expected), Building Permits (better than expected), and the Philly Fed (weaker than expected). On deck we still have to wait for Industrial Production, Capacity Utilization, flash PMI readings for the month of December, and then the KC Fed Manufacturing report at 11 AM will close out the slate of data for the week. That’s a lot to digest!
We haven’t talked a lot about earnings recently, but there are a number of notable names reporting today including Accenture (ACN), Adobe (ADBE), Jabil (JBL), and FedEx (FDX). Of those four, ACN is trading up 10%, JBL is up 5%, and ADBE is trading down 7%. FDX isn’t scheduled to report until after the close.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
Earlier in the week, we referred to it as the market treading water, and that remained the case heading into yesterday’s close as the S&P 500 closed right at its recent resistance level once again. As shown in the chart of SPY below, the ETF has managed to trade above $470 multiple times in the last six weeks as it first broached that level on an intraday basis on November 5th. Since then, there have been multiple attempts to break through that level, but all of them have failed. Could today be the day? In pre-market trading, SPY is trading just above $473 which would be close to a record intraday high. If these levels hold throughout the trading day and SPY can stay above $470, it could just be the welcome Santa was waiting for.
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Dec 15, 2021
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If you insist on certainty, you will paralyze yourself.“ – J. Paul Getty
Ahead of today’s FOMC meeting, we just got some important economic data in the form of Empire Manufacturing, Retail Sales, and Import Prices. Overall, the results weren’t very good. While Empire Manufacturing came in better than expected, retail sales were much weaker than expected at both the headline level and ex-autos and gas. Headline retail sales came in at just 0.3% versus expectations for a gain of 0.8%. When you factor in inflation, though, sales were negative. Lastly, import prices rose more than expected coming in at 0.7% versus forecasts for an increase of 0.6%. On a y/y basis, import prices were up 11.7%.
Futures were flat heading into the report, and have actually picked up a little steam with Nasdaq leading the way. In addition to these reports, Business Inventories and homebuilder sentiment from the NAHB will be released at 10 AM.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
While the stock is already down 4% from its intraday high on Monday, shares of Apple (AAPL) still remain about 25% above their 200-day moving average (DMA). That’s off the recent high of 28% back on Friday, but it’s still elevated relative to history. Going back to 2011, there are only two periods where the stock’s spread relative to its 200-DMA reached significantly higher levels than 25% while there are another three (2014, 2017, and 2018) where the spread reached similar levels before pulling back.
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Dec 14, 2021
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“Theory is splendid but until put into practice, it is valueless.” – James Cash Penney
Futures are lower across the board this morning, but the only index that is down of any significance at this point is the Nasdaq. The big report of the morning was November PPI and at the headline level, it came in stronger than expected rising 0.8% versus forecasts for an increase of 0.5%. Ex food and energy, producer prices were also higher than expected rising 0.7% compared to forecasts for an increase of 0.4%. As one might expect, the initial reaction in futures was weaker equities and higher yields.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
Both the Nasdaq 100 and the S&P 500 have been treading water as both indices are at the same levels now that they were at more than a month ago. For QQQ, the high water line is currently at just over $400 a share. It briefly broached that level in mid-November for two days but could not hold those levels before pulling all the way back to its 50-day moving average. Last week, QQQ approached the $400 level again before selling off yesterday. For SPY, resistance has been even more pronounced at the $470 level. It has now tested that level three separate times since early November but has run out of momentum each time. There’s nothing wrong with equities treading water after big upside rallies, but hopefully, they have the strength to stay afloat.
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Dec 13, 2021
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“To be a better investor, you have to stand on your own. You just can’t copy other people’s insights.” – Li Lu
If you had asked investors last Monday morning if they thought the S&P 500 would be trading at a record high to close out the week, you probably wouldn’t have gotten many takers. Surprising people is what the market likes to do best, though, so that’s exactly what it did last week. To kick off this week, futures were higher overnight but have given up much of those gains although they are still modestly positive. Bitcoin had a brief move above $50K over the weekend, but it has been pulling back in trading today and is back below $49K.
Mid-December is typically when things start to slow down into year-end, but this week will be busy for central banks. Not only will the Fed make its policy announcement on Wednesday, but we’ll also get policy decisions from more than ten other central banks this week, including the Eurozone, UK, Japan, and Russia.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
You know it was a good week in the equity market when sectors that lagged were still up over 2.5%. In last week’s nearly 4% rally for the S&P 500, all eleven sectors were not only higher on the week but they were also all up over 2.5%. Leading the way higher, it was Technology (XLK), which surged 5.9% thanks in large part to Apple’s (AAPL) gain of more than 10%. After Technology, the two sectors rounding out the top three were Energy (XLE) and Consumer Staples (XLP) which gained 3.81% and 3.66%, respectively. It’s not often that you see Technology on the leaderboard with sectors like Energy and Consumer Staples. In spite of last week’s surge, just five sectors are currently at overbought levels with Financials and Communication Services the only two sectors that are still below their 50-day moving averages.
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Dec 10, 2021
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“Inflation is just like alcoholism. The good effects come first.” – Milton Friedman
Following yesterday’s move of just six cents (not basis points but cents) in the Dow, European markets are similarly quiet this morning with the FTSE-100, the CAC-40, and DAX, all trading within 0.1% of their respective closes on Thursday. However, just as the Dow’s move wasn’t entirely representative of the action in US stocks yesterday, the fact that indices are little changed on the day doesn’t reflect that all of those major European indices are well off their lows of the day.
There may not be a lot of direction in equity markets so far this morning, but there’s a good chance that the release of November CPI could act as a catalyst for more of a move throughout the day, although there wasn’t a lot of optimism heading into the report that the reading would come in light,
Once CPI is out of the way, investors can shift their focus to next week’s FOMC announcement on Wednesday. Given Powell’s hawkish pivot right after Thanksgiving, it’s hard to imagine what the Fed could say next week that would really be a surprise to investors at this point.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
With all the volatility we have seen in the S&P 500 over the last month, the largest stock in the S&P 500 has been remarkably calm. The S&P 500’s performance over the last month has been a marginal gain of less than half of a percent, but shares of Apple (AAPL) have rallied over 18%. With a performance spread of more than 17 percentage points, the gap between AAPL and the S&P 500 over the last month has been the widest since August 2020, and before that, you would have to go all the way back to August 2013 to find another time that the spread was wider. There have been plenty of times in the past where AAPL has followed a different path than the broader market, but you don’t often see the gap get wider than it is now.
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