Good morning contrarians!
Stock futures are down a bit as of 0645. Small caps are seeing the most selling, with the Russell 2000 off 0.7%. Nasdaq futures are down 0.5% with S&P 500 and Dow Industrials about 0.4% lower.
Bonds are seeing some bids, with the 10-year yield back down below 1.5%. It was up around 1.53% at yesterday’s close. The more rate-sensitive 2-year yield is down a little less, hovering around 0.675%. It briefly touched 0.71% yesterday.
Commodities are selling off a bit, with crude oil down about 0.8% to trade around $71.85. Copper is down about 1.4%. Natural gas off about 2%. Cryptocurrencies are flat with bitcoin trading around $49,200.
Don’t look now, but major indexes have posted a significant rebound this week. The Nasdaq and Dow are up 5% each since Friday with the S&P up about 4%. The Russell 2000 has added almost 6%. We’re now close to new record highs again. It looks like our old friend might have been a week or so late for the party, but that he’s showed up with aplomb.
The only major economic data release today is the weekly initial jobless claims, out at 0830. Expectations are for 215,000 new claims, roughly in line with last week. It’s slightly above the post-pandemic low of 199,000 set a fortnight ago. But this number is clearly trending in the right direction. Has been for some time, though it’s worth pointing out that the ‘quits levels’ mentioned yesterday declined by almost 5% in October, according to the latest JOLTS report.
So this report will be closely watched and will have to walk a bit of a tight rope. If it disappoints it may bring concerns the economic recovery is slowing. If it’s too good because that would put the fear of Fed rate hates back into markets. (Not entirely sure why those just faded away these last couple of days. Maybe the selling was due to omicron. Guess we’ll never know).
Some news out of China: Regulators have quietly opened an obscure source of funding for property developers, according to a report in the Wall Street Journal. This comes as the country’s top central banker assures us the financial stress at Evergrande and elsewhere in the real estate market won’t spread to China’s economy. If anything, that type of vote of confidence should be seen as the type of thing a sports team gives its head coach before firing him.
Earnings today: Costco (COST), Oracle (ORCL), and Broadcom (AVGO) report after the close. Lululemon (LULU) during market hours.
The Bottom Line
Not too much action yet, though it appears markets might be ready to take a bit of a breather. Not entirely sure what the catalyst could be for more buying at this point, but then you don’t always need a catalyst in bull markets. And the last three days have showed us that we are still in a bull market.
Yesterday’s Bottom Line informed you that with three of our four morning metrics (that is bonds, cryptos, and commodities) pointing to ‘risk off,’ it was likely that some selling would take place. Instead stocks were up most of the day, with the biggest gains in small caps and tech. (In fairness, some positive news about omicron broke shortly after I posted the briefing).
Santa Rally, Initial Jobless Claims: Daily Contrarian, Dec. 9