U.S. markets continued their flight towards fresh all-times highs but settled mixed ahead of Wednesday’s Fed decision on interest rates. The Dow and S&P 500 climbed 0.5% and 0.2%, respectively, with both indexes extending their winning streaks to four-straight.

The Nasdaq slipped 0.2% after failing near-term resistance to snap its four-session win streak.

Meanwhile, the Russell 2000 traded showed strength in the first half of trading before weakening while closing lower by 0.2%.

Financials showed the most strength with the sector adding 1% followed by Real Estate and Health Care which rose 0.5% and 0.4%. Utilities lagged after sinking 1.4% while the Energy sector dropped 0.3%.

Global Economy- European markets traded higher across the board following a key oil pipeline outage and ahead of decisions on central bank policy later in the week.

France’s CAC 40 rallied 0.8% and the Stoxx Europe 600 was up 0.7%. UK’s FTSE 100 gained 0.6% while Germany’s DAX 30 rose 0.5%. The Belgium20 advanced 0.4%.

The German December ZEW survey expectations of economic growth fell 1.3 to 17.4, weaker than expectations for a drop of 0.7 to 18. The December ZEW survey current situation unexpectedly rose 0.5 to 89.3, stronger than expectations for a dip of 0.1 to 88.7.

UK November CPI was up 0.3% month-over-month and 3.1% year-over-year, topping expectations for a gain of 0.2% and 3%, respectively. The November core CPI rose 2.7% year-over-year, matching forecasts.

Asian markets were mostly lower with Australia’s S&P/ASX 200 bucking the trend after adding 0.3%. China’s Shanghai sank 1.2% while Hong Kong’s Hang Seng fell 0.6%.

South Korea’s Kospi declined 0.4% and Japan’s Nikkei gave back 0.3%.

Japan November PPI rose 0.4% month-over-month and 3.5% year-over-year, stronger than expectations for a rise of 0.2% and 3.3%, respectively.

U.S. November NFIB Small Business Optimism Index surged 3.6% to 107.5 and the highest in 34 years. It was the second best reading in the 44-year history of the report, bested only by the 108 print from September 1983.

Plans to hire increased with 24% of the firms reporting, versus 18% previously. Firms looking to boost capital spending dipped to 26% from 27%.

PPI rose 0.4% in November, topping expectations of 0.3%, with the core rate up 0.3% and ahead of the projected 0.2% forecast.

Redbook Store Sales up 3.3% for the year in the week ending December 9th.

U.S. chain store sales jumped 3.2% to 115.1 in the week of December 9, recovering much of the prior week’s 4% decline. The annual pace slowed a bit, however, to 3.1% year-over-year versus 3.7% previously.

Market Sentiment- Fed funds futures remain priced for a 25 basis-point increase in rates on Wednesday, and is about 60% of the way toward pricing in another tightening in March.

The dot plot will likely show a tightening in Q1 and another during the year, and could even start to anticipate three increases.

The iShares 20+ Year Treasury Bond ETF (TLT) traded in negative territory throughout the session with the low tapping $125.67. Lower support at $126.50-$126.25 held into the close with risk to $125.50-$125 and the 50-day moving average on continued weakness.

Lowered resistance is at $126.50-$126.75.

 

Market Analysis- The Spider S&P 500 ETF (SPY) traded to an all-time high of $267.32 with fresh resistance at $267-$267.50 getting split. We have talked about a run towards these levels on continued momentum with a move above the latter getting $270 in play.

Rising support is at $266-$265.50. A move back below the latter would likely lead to a retest of $264-$262.

RSI is pushing late November resistance at 75 with continued closes above this level likely leading to a run towards 80 and October highs. A move back below 70 would be a slightly bearish development.

 

The Consumer Discretionary Select Spiders (XLY) closed higher for the 4th-straight session after making a run to $97.81. Near-term resistance at $98-$98.25 held with the all-time high at $98.37.

Support is at $97-$96.75 with a move below the latter signaling another short-term top. RSI has been holding support at 70 since mid-November with a close below this level being a bearish development.

Continued strength could lead to another test towards 80.

 

All the best,
Roger Scott