Market Overview

Markets Lean Into Positive Terrain Early; Powell Confirmation Hearings Start


The stock markets three major benchmarks, seemingly without much to push them, tiptoed into positive territory in the early going after Monday’s mostly muted session.

Might that change as the day wears on? There is a bevy of economic data scheduled to be released this morning, including consumer confidence and the S&P Case-Shiller Home Price Index. Federal Reserve speakers, including Jerome Powell, the nominee to replace Janet Yellen as chair, will be out today. Powell is scheduled to make remarks to lawmakers, which analysts have said they will closely watch to see if he talks about tax cuts and the economy. (See below.)

Trading was slow yesterday and the session’s end seemed to reflect it. Retail stocks rallied a bit in the early going, but lost their momentum before the session ended, leaving the major benchmarks mostly flat. The Dow Jones Industrials ($DJI), the S&P 500 (SPX) and Nasdaq Composite (COMP) all touched intraday highs but couldn’t hold on to them. The Dow managed to finish in positive territory, but not by much, while SPX, as well as COMP slipped into the red.

As flat as the markets were yesterday, two big boys managed to eke out fresh thousand-dollar highs. Shares of Alphabet Inc (NASDAQ: GOOG) Class A closed at a record $1,072.01, up 1.5%. The stock is up 35% this year against the SPX’s 16% gains. (See chart.), Inc. (NASDAQ: AMZN) shares marked their fourth straight record close, finishing at $1,195.83 as Cyber Monday results poured in. That put the market capitalization of the company at $571.5 billion and the paper wealth of Jeff Bezos, its chief executive, at more than $100 billion, according to published reports. AMZN shares have advanced 58% this year. Some analysts have said that this stock price might be the top for the year—even when there’s still a month of trading left. AMZN shares have finished 12 sessions at fresh peaks since it reported earnings in late October, and is up nearly 23% since then.

Ahead of UnitedHealth Group Inc (NYSE: UNH) analyst meeting today, the big pharma firm offered mixed guidance for next year’s results late yesterday. Revenues were projected to be higher, but profits were forecast to be in a range that is mostly below Wall Street’s expectations. UNH shares fell 1% in the after-hours trading and were off as much as 3% in the early going.

Shares of Buffalo Wild Wings (NASDAQ: BWLD) were up nearly 10% in early trading. Roark Capital Group, the private equity firm that owns Arby’s, said it agreed to purchase the chain for $157 a share in a deal priced at $2.4 billion.

The energy sector was sliding again in early trading after it slipped 1% yesterday, apparently in line with falling crude prices. West Texas Intermediate crude, the U.S. benchmark, finished the session lower by 1.78% while Brent crude slipped less than a half-percentage point. In the early going, both were backtracking.

FIGURE 1: METEORIC RISE? Amazon hit another fresh crest yesterday amid Cyber Monday mega buying, and shares are up nearly 23% since its earnings call in late October. Since the start of the year, AMZN shares have advanced 58% against the SPX’s 16% rise, seen in purple. Data sources: CME Group, Standard & Poor’s. Chart source: The thinkorswim® platform from TD AmeritradeFor illustrative purposes only. Past performance does not guarantee future results.

About the SPX

Has it lost its forward steam? Through the close Monday, the SPX was up 16% for the year, nearly double the average annual price rise of 8.9% since 1950, according to Sam Stovall, CFRA Research’s chief investment strategist. In a recent note, he reminded investors that there have been only eight days in which the SPX has moved more than 1% in either direction in below-normal volatility.

That’s the third lowest percentage reading in the past 65 years, Stovall noted, leaving some market observers to say that the market might experience a sell-off in December. History says otherwise, Stovall said. During the years when volatility was as low as this year, which has happened 24 times since 1950, Stovall said the SPX gained about 2% in December and rose in price nearly 90% of the time. Remember, past performance is no guarantee of future results.

About that New Fed Boss

It looks like Jerome Powell, President Trump’s nominee to take the Federal Reserve reins when Janet Yellen’s term ends in February, might plan to stay on the steady course the Fed has taken to raise interest rates, according to prepared testimony he is scheduled to make today. Powell heads to the Senate for the first of his confirmation hearings.

“We expect interest rates to rise somewhat further and the size of our balance sheet to gradually shrink,” according to the testimony. “However, while we endeavor to make the path of policy as predictable as possible, the future cannot be known with certainty. So we must retain the flexibility to adjust our policies in response to economic developments.” He added that he will look for ways to enhance transparency and accountability.

About that Soon-to-Be Former Fed Boss

As Janet Yellen prepares for her swan song policy-making meeting in mid December, she is scheduled to make what could be her last Congressional appearance before the Joint Economic Committee on Wednesday. No prepared testimony from the Fed on that yet, but it’s likely she will emphasize the economic progress made under her tutelage the last four years along with an update on the state of the economy today, according to Fed analysts.

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