U.S. markets traded to fresh all-time highs throughout Tuesday’s session despite pulling back midday on news that North Korea has fired another ballistic missile.
The Dow gained 1.1% after testing 23,849 to pull within 1% of clearing the 24,000 level. The S&P 500 made a record run to 2,627 after rising 1% while holding the 2,600 level for the 3rd-straight session.
The Nasdaq reached a lifetime peak of 6,914 after rising 0.5% into the closing bell despite slipping into negative territory intraday. The Russell 2000 cleared its previous record peak of 1,524 to reach an all-time high of 1,536 while holding positive territory throughout the session.
Financial stocks led to the upside with the sector rocketing 2.6% followed by Industrials and Materials which rose 1.5% and 1.1%, respectively. Real Estate was slightly weak and was the only sector in the red after slipping 0.2%.
Global Economy- European markets traded higher on news the United Kingdom and the EU reached an agreement on a so-called Brexit divorce bill. UK’s FTSE 100 jumped 1% while the Stoxx Europe 600 and France’s CAC 40 was up 0.6%.
Germany’s DAX 30 added 0.5% and the Belgium20 advanced 0.4%.
In its semi-annual report, the OECD cautioned that financial markets are too optimistic as evidence continues to build that financial asset prices are inconsistent with expectations for future growth and the policy stance, exacerbating the risks of financial corrections and growth downdrafts.
German December GfK consumer confidence was unchanged at 10.7, matching expectations.
Asian markets were mixed despite better-than-expected economic news out of China. South Korea’s Kospi and China’s Shanghai climbed 0.3% while Australia’s S&P/ASX 200 dipped 0.1%. Hong Kong’s Hang Seng gave back 5 points, or 0.02%, and Japan’s Nikkei slipped 7 points, or 0.04%.
China’s service trade deficit narrowed to $17.8 billion in October, compared with a deficit of $22.2 billion in September.
China also reported $42.3 billion surplus in merchandise goods in October, compared with a $30.2 billion surplus in September.
U.S. chain store sales dipped 0.4% in the week ending November 25th, after jumping 1.2% in the prior week.
The Advanced Indicators Goods Trade gap for October trade in goods widened to $68.3 billion from $64.1 billion in the last goods and services trade report. Forecasts were for a deficit of $65.7 billion.
FHFS House Price Index rose 0.3% to 253 in September slightly below expectations for a rise of 0.35%.
S&P Corelogic Case-Shiller Case-Shiller 20-City Composite Home Price Index was up 0.5% to 203.50 month-over-month versus expectations for a decline of 0.25% to 202.4 in September.
November Consumer Confidence checked in at 129.5 versus forecasts for 124.5.
Richmond Fed Manufacturing Index surged 18 points to 30 versus expectations for a print of 15.
Market Sentiment- NY Fed William Dudley didn’t discuss monetary policy but sees increasing data transparency as a continuing priority, along with improving data collection. Additionally, he said with the rise of electronic trading, one needs to be more aware of market practices and the risks.
Fed Chair nominee Jerome Powell said he’d strive to support the economy’s progress, in his prepared testimony. He stated “Our aim is to sustain a strong jobs market with inflation moving gradually up toward our target. Analysts expect interest rates to rise somewhat further and the size of our balance sheet to gradually shrink.”
He said will persue these goals while maintaining the Fed’s independent and nonpartisan status. He also said the Fed needs to retain flexibility to adjust policies in response to economic developments.
Powell went on to add that the U.S. is near full employment by a number of indicators, though he doesn’t believe that wages are pointing to any overheating in the economy or tightness in the labor market.
He also indicated, when pushed, that he does not think that the U.S. has any banks that are too big to fail. He’s also concerned about the sustainability of the U.S. fiscal path, though won’t comment on any specific tax bill.
And finally, Powell believes its time to be normalizing interest rates, though he opposes an audit the Fed legislation, since that may be an attempt to wrestle control of Fed independence.
He believes GDP will grow around 2.5% this year and close to that next year. He says the case for raising rates in December was coming together, with conditions supportive.
The iShares 20+ Year Treasury Bond ETF (TLT) cleared lower resistance at $127-$127.50 after making a run to $127.18 but levels that failed to hold. Upper support at $126.50-$126.25 held on the morning low of $126.47 with a move below the latter being a bearish development.
Market Analysis- The Russell 3000 Index ($RUA) recently cleared prior resistance at 1,530-1,535 and we mentioned a move above the latter would be a continued bullish development.
Today’s record high tapped 1,558 with blue-sky territory opening up to 1,570-1,575 on continued strength. Rising support is at 1,545-1,540 with a move below the latter signaling a short-term peak.
RSI cleared resistance at 70 that served as early November resistance and a level that needs to hold for a possible run at 80 on continued momentum.
The Spider S&P Retail ETF (XRT) surged 3% to clear major resistance at $42 after testing a high of $42.93. Fresh resistance is at $43-$43.25 and levels that held in April.
We mentioned earlier this month the 50-day moving average was on track to clear a descending 200-day moving average and would form a golden-cross once completed.
This is typically a bullish signal and remains in play. New support is at $42.50-$42.25 with a move back below $42 being a bearish signal.
RSI is back in an uptrend with September resistance at 70 in play. Continued closes above this level should lead to further strength.
All the best,
Roger Scott