The Fuse
Equity futures are mixed this morning as the SPX 500 is trickling higher. The Industrials are lower modestly as we have two trading sessions remaining in 2023. Can the bulls advance the markets further to close the SPX index above 4,800?
Bond yields continued to fall yesterday but this morning the long end of the curve is inching higher. The 10 year closed below the key 3.8% level on Wednesday as the markets continue aggressively pricing in fed funds rate cuts as early as March. That may be too soon if the economy remains buoyant, but the committee agreed at this month’s meeting we should see at least 2-3 cuts in the new year, likely back-end of the calendar./span>
While predictions abound regarding the upcoming year and performance, we must note that they should be taken with a grain of salt.
We like to see things play out in real time and not in fantasy, but that being said the conditions are ripe for a modest followthrough year upcoming. If that is the case we’ll see some rate cuts, somewhere between what the Fed and the markets expect to see. Crude oil is modestly lower as is gold as major shipping companies ponder the end of Red Sea disruptions. Euro stocks were little changed overnight while shares in China gained ground, headed for their best day in four months.
It was a wild session yesterday with some huge swings up/down but the bulls retained control. As we mentioned yesterday, the gobs of breadth were a sign of more upside to come, and while it was like pulling teeth the markets did manage to pull off a win, the Industrials and the Nasdaq clearing new highs once again.
More positive breadth but much of that came late in the session, but no matter it was a pretty nice finish. Winners outpaced losers by 17-11 on the NYSE but the Nasdaq was a bit better aligned for the bulls. Only two trading sessions left and after such a strong month of December don’t be surprised if one of these two remaining days is a negative experience.
Volume was poor as the holiday doldrums enter the picture. Traders are squaring positions and trying to do little damage for the remainder of the week. We should however see volume expand by Friday as that is a big expiration day, several series will expire on that day.
Today could be the one, the day when the SPX 500 finally tags a new all time high. It might be a bold prediction but it sure seems as if the market wants to get this over with. Certainly the momentum, seasonality and trends are ripe for a rip to new highs, less than 1% away now.
What’s it mean?
Mediocre internals for the most part but ticks are still flying. These are portraying a slew of buy programs each day, and with strong breadth we could see a bit more upside here. VOLD was not impressive but the last several minutes were strong, probably short covering. Put/calls raced higher as the VIX fell sharply, this is in dangerous territory as when it rises up there could be a monster correction. For now, it won’t be happening.
The Dynamite
Economic Data:
- Thursday: Jobless claims, retain inventories, pending home sales
- Friday: N/A
Earnings this week:
- Thursday: N/A
- Friday: N/A
Fed Watch:
Nothing much on the Fed front this week though the prior week had some more jarring words from fed speakers. The current market or fed funds futures seems to be predicting a slew of rate cuts in 2024, far more than the committee expects. Inflation trends are certainly slowing down though and that may push the Fed to consider more cuts, but the data will help them decide.
Stocks to Watch
Apple – This company continues to pull a rabbit from its hat and hit their sales goals, with holiday shopping still going on can they do it again?
Amazon – It’s go time or Amazon as they simply dominate online sales. The holiday season is often a boom time for them, we’ll hear all about it soon.
Tesla – Plenty of news here with this company as the stock continues to grind higher. That is a big tell, big money is still coming after the stock.