Dec 23, 2021
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“Economics is extremely useful as a form of employment for economists.” – John Kenneth Galbraith
Economists will be working hard this morning as a large batch of economic data was just released. Initial Jobless Claims were right in line with forecasts while Continuing Claims were modestly higher than expected. Personal Income and Spending were both right in line with forecasts at 0.4% and 0.6, respectively. PCE inflation data was slightly higher than expected while Durable Goods Orders rose 2.5% which was ahead of expectations. Even after all that data, though, equity futures are little changed from where they were before the data was released. Still on the docket, we have Michigan Confidence and New Home Sales at 10 AM and natural gas inventories at 10:30.
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.
Since its intraday low on Monday, the small-cap Russell 2000 has rallied more than 5.5% and yet still only modestly above the level it opened at last Thursday. Talk about a volatile stretch! A lot of bullish investors want to call the bottom of the small-cap correction. While the downtrend from the November high appears to have been broken, the Russell still has something to prove with both the 50 and 200-day moving averages, which are both now sloping downwards, looming above. In a bearish tape, these levels typically act as resistance. If the tape is really turning bullish for small caps, these moving averages will need to be taken out.
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Dec 22, 2021
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“In the business world, the rearview mirror is always clearer than the windshield.” – Warren Buffett
Since Thanksgiving, there has only been one trading day where the S&P 500 moved up or down less than 0.5%, but given where futures are trading this morning, there is some hope that this could be number two. This is a time of year where markets are supposed to be calm as investors focus on other things, but as we highlighted yesterday, this December has actually been the most volatile month of the year!
In order for this early calm to continue, though, we’ll have to get through a slug of economic data including the Chicago Fed National Activity Index, revised GDP, Consumer Confidence, and Existing Home Sales. On the Omicron front, we’ve heard anecdotal stories for weeks about how this strain is less severe than prior strains, but we’re now starting to get clinical evidence as a study from South Africa says that Omicron is 80% less likely to result in hospitalization than the Delta strain. That’s some good news!
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 Technology sector experienced a peak to trough pullback of just over 6% this month, but over the last two days, the sector bounced right at a key support level that coincided with the 50-day moving average and the recent lows in early and late November. As we close out the year, the sector will need to break above its recent highs to keep the uptrend intact, but if the current bounce stalls short of the recent highs, the sector could be in for a more extended period of churn.
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Dec 21, 2021
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“The best stock to buy is the one you already own.” – Peter Lynch
It looks like we are going to at least try for a turnaround this Tuesday as US equity futures are all firmly in positive territory the morning after it was announced that the Omicron variant was now the dominant COVID strain in the US. If data released so far proves to be accurate, this is a good thing as this strain of COVID appears to be much weaker in severity than the Delta strain, even if it is more transmissible.
There’s no economic data on the calendar today, so there won’t be much in terms of specific potential catalysts to drive the market, but lately, the market hasn’t seemed to need excuses to move in one way or the other.
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.
They closed well off their intraday lows yesterday, but the major US averages still finished the day down more than 1%. For the S&P 500, yesterday’s bounce came right at support from the prior highs in early September, and the index did not take out its lows from early October. With futures higher this morning, bulls are hoping it marks the start of a year-end rally, but if yesterday’s lows don’t hold, the end of 2021 won’t be pretty.
While the S&P 500 hasn’t quite taken out its lows from October, the Nasdaq 100 did. Not only that, but even after yesterday’s rebound, QQQ remains below its highs from early September. That may change after today, but the index still has work to do before technicians will become more comfortable with the technical picture.
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Dec 20, 2021
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“Times and conditions change so rapidly that we must keep our aim constantly focused on the future.” – Walt Disney
There are less than ten trading days left in 2021, but investors don’t appear to be in a positive mood to close out the year. Futures are kicking off the week on a down note again as all of the major averages are indicated to open down by 1% or more. Commodities are lower, the 10-year yield is lower, and international markets are under even more pressure than US stocks. The surge of the Omicron variant has really started to impact activity in regions where the numbers are rising as consumers stay home. While no one is expecting a return to the situation of Spring 2020, this time around the easy fiscal and monetary conditions that helped to grease the skids in the past aren’t around now.
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.
It’s not often that the S&P 500 drops more than 2% during a week but four out of eleven sectors actually finished the week 1% higher. That was the case last week, though, as the sheer size of Technology and Consumer Discretionary and their declines of more than 4% dragged the entire market lower. These two sectors weren’t even the worst performers as Energy’s plunge had a five-handle on it! On the upside, Health Care, Real Estate, Consumer Staples, and Utilities all rose more than 1%, but because of their relatively low weights in the S&P 500 (besides Health Care), it wasn’t enough to stem the drag of Tech and Consumer Discretionary.
Even after their respective declines last week, Technology and Consumer Discretionary are still both up more than 20% YTD while Energy’s gain is close to 50%. Concerns over the Omicron variant, a tighter Fed, and fiscal and monetary drags in 2022 have been the primary drivers weighing on investor sentiment, and the fact that many investors are sitting on enormous gains has them only more willing to take some profits.
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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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