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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Dec 9, 2021
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“Indecision may or may not be my problem.” – Jimmy Buffett
After a strong start to the week, investors are taking a step back from buying this morning as futures are firmly negative and have been gradually weakening all morning. Following big losses right after Thanksgiving and then a sharp rebound over the last week, investors can’t seem to make up their minds.
The biggest news item of the day so far has been initial jobless claims which fell to an unheard of 184K which was well below the already low estimate of about 225K. As equities pull back, treasuries have been rallying with the 10-year yield back below 1.5%. The big economic data in the US will come tomorrow with the release of November CPI, but overnight in China, CPI came in weaker than expected on a y/y basis (2.3% vs 2.5% forecast).
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.
What a difference a week makes. Looking at how sector performance has changed over the last week provides a perfect illustration of indecisiveness in the equity market. The first snapshot below is from our Trend Analyzer from a week ago today (through the close on 12/1). At the time, every major index ETF was down at least 2.5% over the prior five trading days with the majority below their 50-day moving averages after trading at or near overbought levels just a week earlier. Mega-cap indices like the Nasdaq 100 (QQQ) and S&P 100 (OEF) were holding up best at the time while small and mid-cap stock indices were down over 7% in the span of just five trading days.
Fast-forwarding just a week, the picture has completely changed. Now, every major index ETF in the Trend Analyzer is up at least 3% over the last five trading days, and the majority are back above their 50-day moving averages. Leading the way higher, the same indices that were down the most have bounced back the greatest while mega-cap indices like the Nasdaq 100 (QQQ) and S&P 100 (OEF) are the only two that are up less than 4% over the last five trading days.
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Dec 8, 2021
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“Change is the investor’s only certainty.” – Thomas Rowe Price Jr.
The pre-market tone for equities was flat to negative early, but a report from Pfizer (PFE) showing that three doses of its COVID vaccine were able to neutralize the Omicron variant sent futures notably higher. That boost has proved to be somewhat temporary, though, as futures have given up half of their earlier gains. With all the volatility we have had in the market lately, at this point, the most constructive activity we could see in markets today would be a quiet session for a change. Yesterday, the Russell 2000 had its 5th straight day of daily moves of more than 2%, and while the index traded back above its 200-DMA on an intraday basis, it wasn’t able to hold on to those levels into the close.
It’s another light day of economic data today as the only report on the calendar is the JOLTS report at 10 AM. Economists are expecting to see total job openings in excess of 10 million.
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.
On the Wednesday before Thanksgiving, the VIX traded as high as 20.96 intraday before closing the session at 18.58. The following Friday, it spiked as high as 28.99 on the emergence of the Omicron variant and continued higher the following week hitting an intraday high of 35.32 last Friday. This week has been another story for volatility, though, as the VIX has been in retreat finishing the day yesterday at 21.82. While still well above where it closed on the Wednesday before Thanksgiving, the VIX is currently within a point of its intraday high on the day before Omicron entered the lexicon.
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