U.S. markets settled mostly lower on Wednesday despite the House passing the Republican-backed tax bill with the legislation marking the President’s first major legislative victory.
The official signing remains uncertain but will take effect at the start of 2018.
The Russell 2000 traded in positive territory for much of the session after adding 0.3% while closing higher for the third time in four sessions.
The Dow and S&P 500 slipped 0.1% after falling just shy of new all-time highs on the open. Meanwhile, the Nasdaq gave back 3 points, or 0.04% after failing the 7,000 level for the second-straight session.
Energy shined with the sector rising 1.4% while Industrials and Materials added 0.4% and 0.03%, respectively. Real Estate led the laggards after dropping 1.1% while Utilities sank 0.8%.
Global Economy- European markets closed lower across the board after the International Monetary Fund downgraded its forecast for Britain’s growth, saying last year’s decision to leave the European Union is slowing the economy.
Germany’s DAX 30 crumbled 1.1% while the Stoxx Europe 600 and the Belgium20 tumbled 0.7%. France’s CAC 40 declined 0.6% and UK’s FTSE 100 was down 0.3%.
UK December CBI retailing reported sales dropped 6 to 20, matching expectations.
German November PPI was up 0.1% month-over-month and 2.5% year-over-year, slightly weaker than expectations of 0.2% and 2.6%, respectively.
Asian markets closed mixed with the action somewhat contained following tight trading ranges. Japan’s Nikkei and Australia’s S&P/ASX 200 rose 0.1%. South Korea’s Kospi and China’s Shanghai fell 0.3% while Hong Kong’s Hang Seng slid 0.1%.
The Japan October all-industry activity index rose 0.3% month-over-month, matching expectations.
U.S. MBA Mortgage Applications sank 4.9%, accompanied by a 5.5% drop in the purchase index and a 3.2% decline in the refinancing index for the week ending December 15th. The 30-year mortgage rate dipped 4 basis points to 4.16%.
U.S. Existing Home Sales climbed 5.6% to 5,810,000 in November, topping forecasts of 5,550,000, and are near 11-year highs. Condo/co-op sales surged 14.3% versus the prior 5% gain.
Single family sales were up 4.5% versus the 2.1% October increase. Sales were higher in 3 of the 4 regions, with the Midwest and South up 8.4% and 8.3%, respectively, while the Northeast rose 6.7%. The West fell 2.3%.
The months’ supply of homes dropped to 3.4 from 3.9. The median price rose to $248,000 versus $246,000 with prices up 5.8% year-over-year.
Market Sentiment- The iShares 20+ Year Treasury Bond ETF (TLT) showed continued weakness after sinking 1.1% to a low of $123.95 while extending its losing streak to three-straight.
Fresh support from mid-November at $124-$123.75 held but the close below the 50-day moving average was a bearish development. There is risk to $123.25-$123 and the 200-day moving average on a close below the latter.
Lowered resistance is at $124.50-$124.75.
We mentioned RSI could fall to 40-35 on continued weakness with the October low near 30 on a move below the latter.
Market Analysis- The Spider S&P 500 ETF (SPY) traded to a high of $268.33 with fresh resistance at $268.50-$269 holding. We have talked about a run towards $270 coming on continued strength and this week’s all-time high has tapped $268.60.
Rising support is at $266.50-$266 with a move back below $265 likely signaling a short-term top with risk to $264-$262.50.
RSI failed late November and recent resistance at 75 with a close back below 70 being a slightly bearish development.
The Technology Select Sector Spiders (XLK) traded to a high of $65.01 on the open with fresh resistance at $65-$65.25 holding. Monday’s all-time peak reached $65.20 with fluff up to $66.50-$67 on a close above this level.
Support is at $64.25-$64 with risk to $63-$62.75 and the 50-day moving average on a close below the latter. RSI recently held mid to late-November resistance at 70 and is currently trying to hold support near the 60 level.
All the best,
Roger Scott