1. Moving the markets

The rebounding efforts after yesterday’s slump already failed in the futures market, and this uncertainty carried over into the regular session with the Dow and S&P slipping, while the Nasdaq shook off weakness and closed in the green by +0.54%.

Some market sectors saw solid increases, such as SmallCaps (IWO) and MidCaps (IWP), which gained +1.5% and +1.08% respectively, both of which own in my advisory practice.

The lack of a driver to ramp the markets higher was apparent as lawmakers continued with stimulus struggles with doubt spreading that an agreement might not be reached before the end of this year.

But the band aid approach was used to at least keep the government operating for another few days, as CNBC reported:

The House of Representatives passed a government funding extension Wednesday that would keep the federal government running through Dec. 18 and buy time for further negotiations for a bigger relief bill.

On the economic front, talk of a V-shape recovery has pretty much disappeared with the latest Initial Jobless Claims jumping the most since March. Commented ZH:

Initial claims printed 853k (vs 725k exp), a 137k jump from last week and the biggest weekly increase in new claims since March…

This is the highest number of new benefits seekers in three months.

Continuing Claims also rose on the week, from 5.527mm to 5.757mm – the first increase since August and biggest increase since May…

But the total number of unemployment claimants has dropped below 20 million…

In the end, traders saw no reason to jump in the markets, and even the ever-present computer algos seemed to lack motivation to commit.

1. Moving the markets

An early bounce in the markets disappeared in a hurry with tech shares struggling in part due to the Federal Trade Commission and state attorneys general led by New York filing an antitrust complaint against Facebook. The allegations include stifling of competition to protect its monopoly power.

That announcement took down the tech sector the most, with the Nasdaq surrendering almost 2%, but the other two major indexes stumbled as well. However, given the fact that we were hovering in record territory, today’s pullback was modest and in line of what you might expect after scoring all-time highs.

“I think we’re having a bit of a digestion day after hitting new highs,” said Keith Lerner, chief market strategist at Truist. “There’s some hesitation because of the stimulus talks, but leadership still shows the market is leaning toward something happening” on that front. Lerner pointed out that small-cap stocks weren’t down as much as the large-cap indexes.

Of course, the battle over the relief bill went on full force and took the starch out of the early levitation, after McConnell slammed Schumer over the relief package rejection.

ZH summed up the tit for tat like this:

*MCCONNELL SAYS DEMOCRATS MOVING GOALPOSTS ON AID BILL

*MCCONNELL SAYS SCHUMER, PELOSI BRUSHING OFF GOP AID PROPOSALS

*MCCONNELL SAYS DEMOCRATS NEED TO DECIDE TO MAKE LEGISLATION

FANG stocks got hammered with JP Morgan analyst Ryan Brinkman not helping matters when opining that those shares were “drastically” overvalued.

The usual support from the well-documented short squeezes was conspicuously absent when that sector suffered its biggest loss since the end of October.

The US Dollar did a turnaround and spiked higher thereby putting the pressure on gold with the precious metal giving back its hard-fought gains of the recent past.

With equities being sold, you would have expected bonds to rally, but that did not happen; yields rose pulling down bond prices.

In the end, it was just of those days where there was simply no place to hide.

1. Moving the markets

Despite the major indexes showing early weakness, as optimism about a quick passing of the fiscal stimulus bill vanished, equities ended up finding some support. That level served as springboard for a nice mid-day rally, which kept the indexes in the green. As has been the case lately, and today was no exception, the usual short squeeze lent a big hand in today’s ramp.

The Nasdaq was the leader with a moderate +0.50% gain, which looked downright puny when compared to the chest pounding +1.75% advance of the SmallCap Growth ETF IWO, which we have exposure to.

With the stimulus bill being in limbo, traders focused on Pfizer’s vaccine rollout in the U.K., which sparked hopes of a faster economic recovery in the future with 20 million doses having been ordered.

As stocks were gaining, so did bonds, with yields dropping thereby supporting gold. The US Dollar had no impact on the precious metals sector, as it hacked around aimlessly.

With all that bullishness, it’s still concerning to me that smart money is not participating in this “ramp-a-thon,” as Bloomberg demonstrates with this chart:

For sure, this makes me go “hmm.”

1. Moving the markets

The futures markets were mixed due to fresh tensions between China and the U.S., with uncertainty rising as progress on the coronavirus relief bill was nowhere in sight.

This theme carried into the regular session where two of the major indexes headed south and never crawled back out of the red zone. The Nasdaq diverged and solidly meandered above its unchanged line the entire time.

SmallCap Growth ETFs rallied as Value ETFs slipped. However, the dominant gainer was gold (GLD), which rebounded +1.47% and reclaimed its 200-day M/A. The US dollar index assisted by giving back much of an early bounce.

With Covid-19 related cases rising, calls for more stimulus have been increasing, but lawmakers are continuing to struggle with a solution. Additionally, government funding needs to be extended to buy more time to avoid a shutdown.

ZH posted these critical headlines:

• 1154ET: SOME STATES’ COVID VACCINE ESTIMATES USED OUTDATED FIGURES, STATE FIGURES ASSUMED MORE PFIZER SHOTS WOULD BE AVAILABLE”
• 1200ET: McConnell re-evaluating liability protection, to announce $900bn bill at 3pm
• 1215ET: McConnell will not be announcing bill at 3pm

Bond yields dipped after Friday’s spike thereby alleviating fears, at least for the time being, that the 1% psychologically important ceiling might be broken to the upside, an event that could wreak havoc with equity markets.

Right now, that danger is not imminent, but it remains to be seen if there is enough bullish power left in the tank to drive the S&P 500 to its designated goal of 4,000, as some analysts seem to hope think.