1. Moving the markets

The bullish mood continued with the S&P and Nasdaq setting new records, while the Dow briefly crossed its 29k marker but backed off later in the session.

Supporting the ramp higher was news that the U.S. no longer plans on designating China a currency manipulator, which is mainly a symbolic designation but was also seen as a good will gesture.

That further seems to soothe the always raw nerves in the US-China trade battle, which are scheduled to be signed this Wednesday, although it will only be a Phase-1 settlement with other negotiations to follow with the goal to eventually achieve a full resolution.

With the earnings season on deck, rumors circulated that, once world’s largest investment banks show their report cards, some of the details (fixed income) may not be as bad as feared, which lent support to today’s advance.

Taking top billing today was the Nasdaq with a +1.04% gain, while the S&P settled for 2^nd place with a nice showing of +0.7%, a good chunk of which came during the last hour push, as we have witnessed many times in the past.

All eyes are now on tomorrow’s start of the financial earnings reporting cycle, which may very well give a hint as to what else is to come.

1. Moving the markets

After the opening bell, the major indexes continued their attack into record territory, as the attention moved from Iran to the latest in the U.S.-China trade agreement.

It appeared that the tensions in the Middle East eased somewhat, as the war rhetoric seemed to have slowed down, or at least has been put on the back burner for the time being. Trump’s comments yesterday that he wasn’t pushing for an all-out war with Iran, was a relief for traders and resulted in a continuation of the rebound.

The trade deal now took front and center again with China’s Vice Premier He scheduled to lead a delegation to Washington next week to sign the Phase 1 agreement, which supported the current bullish market mood.

In the meantime, the Fed’s vice chairman Clarida announced that the economy “was on solid ground,” but emphasized that the Fed’s interest rate policy may be changed at any meeting. Surprisingly, this statement did not have a negative market moving effect.

In the end, the major indexes melted up again with the S&P’s forward PE now at 18.5x, which is its highest since the dotcom bust, according to ZH.

It simply confirms that fundamental evaluations no longer matter, until one day, they do. Until then, what matters are the coordinated efforts by the Central Banks to maintain low to negative interest rates and making sure an abundance of liquidity, AKA the #1 market driver, is always available.

1. Moving the markets

Despite a sharp sell-off overnight in the futures market, which pulled the Dow down some 400 points, the negative mood had completely changed by the time regular session bell rang.

We opened slightly higher with upward momentum gaining steam, after remarks by Trump suggested that the U.S. and the Iranian were refraining from further military action.

He further minimized Tuesday’s attack by elaborating that no U.S. casualties were sustained, and only “minimal’ damage was done to U.S. military facilities in Iraq.

In the end, the market’s initial “risk-off” reaction reversed in no time sending the S&P 500 and Nasdaq into record territory, although both indexes came off their highs and slipped into the close. On the downside, crude oil was hammered, as the de-escalation theme ruled the day.

On the economic front we learned that private sector employment data from ADP showed that 202,000 new jobs were added in December, which was above the expected number of 157,000. We’ll have to wait and see if Friday’s employment report supports that trend as well.

AS ZH posted, “from WW3 to record highs in 12 hours, as missiles flew and so did tweets and now all is well again.”

I am sure there will be more to this story, as time goes on.