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Markets Prepare for the End of a Decade

Stout spending around the holiday shopping season and a positive market mood helped lift U.S. stocks to record highs last week.

  • NASDAQ Composite -0.52% Dow -0.38% S&P 500 -0.39% Russell 2000 -0.16%
  • NASDAQ Advancers: 1135 Decliners: 1233
  • WTI Crude: Flat   Gold -0.1%   10yr Treasury 1.92%   VIX:  +7.45%
  • Market Volume (vs Friday): +20%

Market Movers

  • Chinese trade delegation expected to visit Washington this weekend for a phase one deal signing
  • U.S. Pending Home Sales for November +1.2% vs. +1.4% consensus
  • November Monthly Advance Retail Inventories -0.7% vs + 0.1% consensus
  • October revised to +0.1% from +0.3%
  • November Monthly Advance Wholesale Inventories flat vs +0.2% consensus
  • October revised to flat from +0.1%
  • December Chicago PMI 48.9 better than consensus of 47.9
  • December Dallas Fed Manufacturing -3.2% vs consensus of flat growth

Chris’ Commentary

Stout spending around the holiday shopping season and a positive market mood helped lift U.S. stocks to record highs last week. The S&P 500 and Dow Jones Industrial Average both closed at fresh highs Friday. The Nasdaq Composite snapped an 11-session winning streak but still closed above the 9,000 mark for the 2nd time this year. The Russell 2000 underperformed for the second straight session.

Today, we start the day lower on extremely light trading volume. Headline news is relatively quiet as is the economic calendar. Despite the sluggish start, the S&P 500 is on pace for its 4th consecutive month of gains. U.S.-China trade deal is still in focus as reports say that Vice Premier Liu He will lead a delegation to Washington this Saturday to sign a “Phase One” trade deal.

Currently, 10 of the 11 of the S&P 500 sectors are trading lower with Tech and Communications down about 1%. Energy is up about 0.25%. Crude oil is flat following last week’s gain of 2.1%. Gold and the dollar both trade lower while the yield on the 10-yr stands at 1.92%. 

We will have another holiday shortened trading week to look forward to as markets will be closed Wednesday for New Year’s Day. Tuesday the 31st will be a full day of trading. For 2019, the S&P 500 is up over 28%, the Dow up over 22%, the Nasdaq nearly 35% and the Russell 2000 up 23%. The Nasdaq 100 Index, which tracks the performance of the 100 largest non-financial companies listed on Nasdaq is up an eye-popping 37.5%. Apple (AAPL) and Microsoft (MSFT) which comprised a combined 22% of the N100 Index’s weighting are up 83.5% and 55.5% YTD respectively. 

Below is the economic calendar for the week:

Economic Calendar

Time Release Name For
MONDAY, DECEMBER 30
8:30 Wholesale Inventories Nov
9:45 Chicago PMI Dec
10:00 Pending Home Sales Nov
TUESDAY, DECEMBER 31
7:45 Retail Economist/Goldman Chain Store 28-Dec
8:55 Redbook Chain Store 28-Dec
9:00 FHFA House Price Index Oct
9:00 Case-Shiller Home Price Index Oct
10:00 Consumer Confidence Dec
WEDNESDAY, JANUARY 1
New Year’s Day – Markets Closed
THURSDAY, JANUARY 2
8:30 Initial Jobless Claims 28-Dec
8:30 Continuing Claims 21-Dec
9:45 Manufacturing PMI Dec
FRIDAY, JANUARY 3
10:00 Construction Spending Nov
10:00 ISM Manufacturing Index Dec
10:30 EIA Natural Gas Inventories 28-Dec
11:00 DOE Crude Inventories 29-Dec

Sector Recap

MIDCHART1_123019

Brian’s Technical Take

The Long Island Rail Road was quiet as a mouse this morning given so many commuters are home for the holidays with friends and family.  Those with the will power to completely unplug are certainly better off, however they are missing out on key price action taking place throughout the markets in these final days of 2019. 

Last Friday’s MIDDAY Update was timely as the bullish setup in the EURUSD currency pair has triggered based on today’s “breakout” above the key 1.12 resistance level.  Two weeks ago in the 12/18 MIDDAY Update we highlighted the constructive technical setups on the long end of the yield curve – specifically for both the 10YR UST and German Bund yields.  Both long yields have a near identical price pattern of higher lows converging closely towards a clearly defined horizontal resistance (i.e. ascending triangle). 

The long UST yield (chart 2) remains in consolidation mode along its ~1.94% resistance line, however the 10YR German Bund yield (Chart 1) is today making its own bullish breakout above a five month resistance level to last sale -18bps.  The key now is for the long bund yield to maintain the upside momentum. 

Given the fractal nature of markets, I suspect the long UST yield will soon follow suit and register its own bullish breakout above the key 1.94% level.  As an update the 200-day moving average is just above at the 2% level and will be a quick test for the 10YR UST yield if and when it breaks out above 1.94%. 

With the short end locked down for the foreseeable future, the curve should continue to widen in a bear steepening fashion which often times bodes well for select cyclical groups such as Financials, Industrials, and Materials.

MIDCHART2_123019

 

MIDCHART3_123019

Nasdaq's Market Intelligence Desk (MID) Team includes:

Charles Brown is Associate Vice President on The Market Intelligence Desk with over 20 years of equity capital markets experience. Charlie has extensive knowledge of equity trading on both floor and screen-based marketplaces. Charlie assists with the management of The Market Intelligence Desk and works with Nasdaq listed companies providing them with insightful objective trading analysis.

Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.

Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen-based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

Brian Joyce, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Before joining Nasdaq, Brian spent 16 years as an institutional trader executing equity and options orders for both the buy side and sell side. He also provided trading ideas and wrote technical analysis commentary for an institutional research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Transportation companies, among others, understand the trading in their stock. Brian is a Chartered Market Technician (CMT).

Michael Sokoll, CFA is Associate Vice President on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information. 

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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