1. Moving the markets

An early rally bit the dust during the last 2 trading hours with the major indexes surrendering early gains and dumping into the red. Given recent advances the drop was modest with the Dow and Nasdaq faring the best with a loss of -0.22% and -0.12% respectively.

MidCaps and GLD hung around the unchanged line, while SmallCaps bucked the weakness in the markets by powering ahead +2.08%, thereby increasing their YTD gain to around +10%.

The focus of the day was Biden’s upcoming stimulus plan, which had traders on edge all session, and even the pre-programmed computer algos were not able to maintain bullish momentum into the close.

Added CNBC:

President-elect Joe Biden is expected on Thursday evening to unveil a stimulus plan that will include a boost to the recent $600 direct payments, an extension of increased unemployment insurance and support for state and local governments. The stimulus could be as big as $2 trillion.

On the economic front, traders had to digest worse than expected Initial Jobless Claims Data, which rocketed to their highest since August. A stunning 965k Americans filed for the first time, which was a massive increase over last week’s 784k and way above expectations of 789k. This again confirms the disappointing trend in economic data.

The US Dollar initially rallied but then hit a glass ceiling, bounced off and headed sharply south. Gold’s overnight’s spike lower reversed, but in the end, the precious metal drifted south and was not able to hang on to its gains.

Bond yields spiked again with the 10-year now at 1.13% after having dropped below 1.9% intra-day. Much of tomorrow’s market direction will come from the interpretation of Biden’s fiscal bonanza speech tonight. Anything less than expected will likely give the bears some support, though possibly only for the short-term.    

1. Moving the markets

After yesterday’s modest pullback, the major indexes continued to aimlessly vacillate around their respective unchanged lines throughout most of the session. A last hour push created enough upward momentum to assure a green close.

The Nasdaq led the charge with a gain +0.28%, despite the FANGs tanking. But, as has been the case lately, SmallCaps ruled jumping +1.56%, which was closely followed by MidCaps sporting a solid +0.85%. Even GLD, which had slipped during the recent past, finally managed to score +0.62%.

That means for the year, the Nasdaq is about unchanged while SmallCaps are the “dominator” with a chest pounding advance of +7.5%.

Assisting the move higher was the 2021 short squeeze, which appears to continue unabated and seems to be a most reliable tool by the algos to shove the markets higher, as the shorts need to cover, thereby assisting the levitation.

Bond yields were in a world of their own when, after an early bounce higher, the bottom fell out and yields tumbled and broke below a crucial but short-term uptrend channel. That’s what kept GLD in the green late in the session, while a collapsing US Dollar lent a helping hand as well.

I always enjoy Bloomberg’s comparisons of current to past market events. Most will not align with history, but it remains to be seen, if the latest one will:

For sure, if this scenario plays out, would it not be a really good idea to have an exit strategy?

1. Moving the markets

The futures market already indicated a negative bias with US equities and global stocks dropping off their record highs on Friday. A sense of caution dashed across trading desks, as questionable economic data, hopes for more stimulus, political turmoil and the continued barrage of Covid-19 cases combined to give the bears something to cheer about.

For sure, the first week of 2021 was a strong one for equities, so it’s no surprise to see a pullback in the making, which clobbered the Nasdaq more than the other two major indexes. TSLA and TWTR were the biggest losers with the latter reaping the “rewards” of having banned 1,000s of subscribers.

Gold was in for a wild ride, up some 2.5% in the futures markets, then dumping into the red, recovering nicely to catch up to its early gains, but fading into the close but with a +0.56% profit. Unfortunately, the Gold ETF GLD did not keep up and ended down -0.18%.

The precious metal’s roller coaster was triggered by spiking bond yields with the 10-year now having clearly busted through the 1% level and settling at 1.13%. The US Dollar continued its ascent out of the basement and surged higher today but faded into the close.  

Of course, the political grandstanding gave an assist to today’s weakness:

“When you listen to the speaker of the House … basically just saying the president is the most dangerous man, you got a week of danger and the markets don’t like it,” CNBC’s Jim Cramer said on “Squawk on the Street.”

It promises to be a week of uncertainty and volatility.