[Chart courtesy of MarketWatch.com]

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.

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[Chart courtesy of MarketWatch.com]

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.”

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[Chart courtesy of MarketWatch.com]

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.

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[Chart courtesy of MarketWatch.com]

1. Moving the markets

With both warring parties looking to find common ground for a stimulus package, demands had been considerably dropped from the original over $2 trillion to a far more modest $907 billion. Optimism prevailed early on when a more comfortable number of $600 billion was circulated.

However, nothing was decided, but the markets were the beneficiaries nonetheless with the major indexes showing green numbers. But reality struck late in the day when Pfizer dialed back its vaccine rollout plan, as supply chain issues surfaced.

The S&P 500 immediately headed south and surrendered its gains but only closed moderately in the red, while the other two major indexes remained easily above their respective unchanged lines.   

On the economic front, we learned that initial jobless claims dropped this week but still showed a disappointing 712k new filings vs. expectations of 775k. Looking at the big picture, there are still over 20 million Americans filing weekly for some kind of unemployment benefit, according to ZH. That said, it appears that tomorrow’s payroll print may be disappointing.

The big assist for equites came from none other than the biggest short-squeeze since September, as Bloomberg pointed out in this chart. Added ZH:

Most shorted stocks are up 17 of the last 22 days, and up a stunning 35% since the start of November.

10-year Bond yields pulled back from their recent ascent towards the 1% level, at least for the time being. The US dollar continued its best imitation of a swan dive, thereby lending support to rising gold prices, which bounced off their 200-day M/A.  

I will be out of town tomorrow and won’t be able to write the market commentary, but I will post the “ETFs on the Cutline” on Saturday morning.

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