1. Moving the markets

Global stocks and US equity futures leaped as a result of Trump signing the $2.3 trillion spending package, while euphoria reigned supreme in the UK, as a last-minute trade deal with the EU was signed.

Here’s CNBC:

Trump signed a $900 billion Covid-19 relief bill into law, averting a government shutdown and extending unemployment benefits to millions of Americans. The signing came days after Trump suggested he would veto the legislation, demanding $2,000 direct payments to Americans, instead of $600. The House is expected to vote on a $2,000 direct payment on Monday, but the GOP-led Senate is not expected to push it through.

This added encouragement to the Wall Street crowd, as it now appears that the current rally may have legs and could continue into the near future. The reason is, as analyst Tom Essaye pointed out, that the main support pillars are still in place, namely Federal Stimulus, FOMC stimulus, vaccine rollout, a divided government, and no double-dip recession, although I beg to differ on the last point.

Still, the rally predominantly included the major indexes, while the recent performance darlings, Small- and MidCaps, took a breather and gave back some of their latest sharp gains.

The US Dollar index rose for a change, while gold, after an early bounce towards the $1,900 level, ended up giving it all back.  

As I keep posting, nothing makes sense, especially the markets pumping while underlying Macro Data are dumping, as Bloomberg points to in this chart:

Makes me wonder how long this can go on before the jaws of reality finally snap shut.

1. Moving the markets

The futures already whipsawed on Trump’s decision to return the stimulus bill to Congress, as it contained billions in unacceptable pork expenditures. The initial drop quickly reversed and, by the time the regular session opened, the major indexes were already in rally mode, except for the Nasdaq, which lagged all day.

However, a dive into the close pushed the tech sector into the red, but the Dow and S&P managed to hang on to some modest increases along with SmallCaps.

The Dollar index fell, US bond yields rose, and gold finally eked out a gain of +0.34%

Economic indicators were mixed with New Home Sales puking by 11% MoM in November, Durable Goods orders surging back into the green for the year, and Initial Jobless Claims improving to ONLY 803k new filings, which is down from the prior month’s upwardly revised 892k. Be that as it may, it does not represent an economy in recovery mode.

Adding all the econ data up, ZH seems to agree:

Core Durable Goods miss, Personal Income and Spending miss and drop, UMich Sentiment miss and drop, total jobless claims remain above 20 million, and new home sales miss and drop… all sending hard and soft macro data plunging…

And this chart by Bloomberg confirms it.

Tomorrow will be a short trading day with the markets closing at 10 am PST. I will be out for the rest of this week and will return on Monday with the latest market commentary.

Merry Christmas to you.

Ulli…

1. Moving the markets

For the 3^rd day in a row, the S&P 500 meandered aimlessly and ended up in red territory again but by a modest amount. Even the arrival and passing of the long-awaited Covid stimulus deal could not generate any buying enthusiasm for the major indexes.

However, the Nasdaq bucked the trend, but was easily outperformed by Small- and Midcap ETFs with gains of +1.86% and +1.01% respectively. Consumer confidence tumbled to 4-month lows and banks were a hindrance for the Dow.

The focus today was on the $900 billion pandemic aid bundle, which was attached to a $1.4 trillion package to keep the government funded through September 30^th. Trump is expected to sign it into law within a few days. Unfortunately, the entire deal contains a lot of pork, as ZH outlines in this post.

The sour mood in the markets was a result of more bad news about a new virus strain, which so far has shut down and isolated the UK from most of the world. Many European countries enacted severe travel restrictions on visitors from the UK and some trade shipments have been interrupted.

Bond yields went sideways, but the US Dollar Index found some strength, thereby preventing gold from staging a rebound.

I expect similar action on reduced volume not only tomorrow but also during the abbreviated session on Thursday.

1. Moving the markets

An early 400-point drop in the Dow, caused by fears about a new Covid strain, created a deep hole for the markets but, as if by magic, a sudden turnaround materialized. The major indexes reversed with the Dow completing a trading range of some 800 points.

It appears that the $900 billion agreed upon stimulus bill lent a huge assist, yet it punished the US Dollar, which had spiked on the early equity drop, but ended up wiping out most of its early gains.

This volatility carried over into bond land, where the 10-year yield first fell and then spiked. Of course, Steve Mnuchin’s “calming the market appearance” on CNBC, during which he uttered nothing new, was enough to stimulate a buying stampede shifting the computer algos into overdrive.

Equities also received indirect support from a rallying banking sector due to the Fed allowing banks to again engage in buyback activities after a recent stress test.

In the end, it was only the Dow which managed to crawl back above its unchanged line for the day but given the magnitude of the early dump, the losses were moderate for the day. Gold pumped overnight but was not able to hang on to those initial gains.