1. Moving the markets

For the first time in some 4 weeks, equity markets took a dive right at the opening and, despite a valiant attempt to rebound back to the various unchanged lines, they stalled and slid into the close.

However, given the relentless move higher over the recent past, today’s pullback is hardly worth mentioning, as the S&P 500 surrendered only -0.58% thereby ‘beating’ the Dow and Nasdaq.

There was no catalyst for this pullback other than traders’ view that the recent sprint into record territory was overdone, and a break was in order. Even news on the easing of the trade tensions with China had no effect, as the bears finally had a reason to cheer.

Of course, trading volumes were thin, which could have been a contributor to today’s losses. The markets will be closed on New Year’s Day, not just here in the U.S. but in most parts around the world.

As ZH pointed out, the long-awaited recoupling between stocks (down) and bond yields (up) finally occurred today, after the decoupling on 12/20/19. However, we need to see more time pass to properly evaluate if this is the beginning of a new directional movement for these two asset classes, or if today was just an interruption of the prevailing trend.

Looking at Ed Yardeni’s Fundamental Stock Market Indicator, we see that it currently signals that the S&P 500 is overvalued by about 20%. Only time will tell, if this index has forecasting value.

1. Moving the markets

The Dow was the beneficiary of today’s news that Boeing’s CEO has “resigned” and was replaced by its current Chairman. This contributed at least 50 points to initial 100-point surge.

The major indexes crept into new record territory also supported by news that China intends cut its tariffs for pork, pharmaceuticals and some high-tech components starting January 1, 2020.

This appears to be the latest sign that US and China are finally serious in completing the partial trade agreement after 2 years of mudslinging and jawboning, which affected global and domestic economies. Maybe, just maybe, we are seeing some de-escalation of tensions.

In the domestic arena, we learned that Existing Home Sales unexpectedly slipped in November, while New Home Sales surprised to the upside with a +1.3% MoM gain. Durable Goods orders also did the unexpected, namely plunging -2% MoM vs. expectations of +1.5% MoM, which translates to a YoY breakdown of -5.7%; the worst since 2016.

But, most of those things no longer matter, and in the end, the major indexes eked out another gain, although on below average volume. The Dow lead the pack, while the S&P scored 8 record intraday highs in a row, its longest streak since 1998 (14 days).

The markets will have a shortened session tomorrow and on Thursday, so I will not write a commentary on those two days. However, I will post the StatSheet as usual and write Friday’s wrap up, which is then followed by the “ETFs on the Cutline” post on Saturday.

I wish you a Merry Christmas.

Ulli…