Powell Pulls Rug on Santa Rally

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Thursday, Dec. 19. The Bottom Line segment of today’s podcast starts at (4:43) for listeners who want to skip ahead.

State of Play

Stocks plummeted yesterday after hawkish commentary from Fed Chair Jerome Powell. The damage was ugly when all was said and done. Small caps saw the worst of it, with the Russell dropping more than 4% to wipe out all post-election gains. Tech got beaten up as well, with the Nasdaq dropping by 3.5%. Dow Industrials saw their 10th straight day of losses.

(‘Jay Powell the Grinch who stole the 2024 Santa Rally’ by author via OpenArt.ai)

As we eye our board of indicators for signs of direction at 0540, risk appetite appears to have recovered already, at least in equity markets:

• Stock index futures are pointing to gains. The Nasdaq and S&P 500 are up 0.5% as is the Russell 2000 which tracks small caps. Even the Dow is positive, +0.3%;

• Cryptos are down a bit but off of the lows from last night. Bitcoin is down <2% to trade around $102,000;

• Commodities are moving a bit lower with WTI crude oil down 0.6% to trade around $70/barrel and copper down 1.5%;

• Bonds are mixed. The 2-year yield, the most sensitive one to Fed policy, is down 4 basis points to 4.32%. The 10-year yield is up 3bps to 4.53% (yields move inversely to prices. Both still higher than yesterday at this time.

Today’s Known Events

We have some earnings to distract us. Reporting this morning are:

• Accenture (ACN 0.00%↑), the consulting company;

• Darden Restaurants (DRI 0.00%↑) a solid indicator for casual dining in the US;

• CarMax (KMX 0.00%↑), a good gauge of used car sales;

• Lamb Weston (LW 0.00%↑), the potato supplier covered previously in this space.

After the close at 1600 we will hear from Nike (NKE 0.00%↑) and FedEx (FDX 0.00%↑), among others.

Seeing how it’s Thursday we will also get initial jobless claims at 0830. Economists who were surveyed expected 229,000 new claims, a decline from the 242,000 recorded last week but still ahead of the four-week average of 224,000.