The Vicissitudes of a Holiday Market Are on Display

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The futures for the major equity indices are all pointing higher this morning. The basis for that positive disposition is up for debate considering there isn’t a specific news driver acting as a bullish focal point.

Currently, the S&P 500 futures are up 19 points and are trading 0.5% above fair value, the Nasdaq 100 futures are up 45 points and are trading 0.5% above fair value, and the Dow Jones Industrial Average futures are up 148 points and are trading 0.4% above fair value.

Some peculiar interplays on the news front that make it tough to ascertain the basis for today’s bullish bias include the following:

  • Growth worries tied to COVID-related lockdowns in China were reportedly behind yesterday’s selling, but today stocks are indicated higher in the face of reports that lockdowns in China have reached record levels.
  • ECB member Holzmann made the case for a 75-basis point rate hike at the Governing Council’s December meeting while counterpart Mario Centeno thinks conditions are right for a smaller rate hike.
  • There has been a good bit of earnings news since yesterday’s close, yet the response has been mixed. To wit: Best Buy (BBY) is up 8.6% and Dollar Tree (DLTR) is down 2.2% after their reports; Agilent Technologies (A) is up 4.3% after its report and Medtronic (MDT) is down 4.6% after its report; Analog Devices (ADI) is up 3.0% and Dell Technologies (DELL) is down 2.1%.

The news backdrop, then, seems to be more in-line with a market that might open flat to down, so we naturally turn our attention to the disposition of the mega-cap stocks and that’s where we see a basis for some ballast in the futures market.

Tesla (TSLA) is up 1.5%; Amazon.com (AMZN) is up 0.6%; Meta Platforms (META) is up 0.5%; NVIDIA (NVDA) is up 0.5%; Alphabet (GOOG) is up 0.4%; Apple (AAPL) is up 0.3%; and Microsoft (MSFT) is up 0.2%.

There isn’t a news item responsible for the relative strength in these stocks, all of which were down yesterday with the exception of Microsoft.

This is the nature of a holiday trading environment that is accented with thinner trading volumes. There isn’t always a news item driving things. Sometimes the leaning of the market is simply rooted in there being more buyers than sellers and vice versa.

Currently, the buying interest is greater than the selling interest, whereas yesterday the selling interest was greater than the buying interest.

Treasury securities are in a similar position. Yesterday, the 10-yr note yield was up one basis point to 3.83%. Today, it is down three basis points to 3.80%, perhaps benefiting some from Morgan Stanley’s Chief Investment Officer, Mike Wilson, saying he expects a “pretty steep decline in inflation” between now and the end of 2023, according to CNBC.

The seesaw action has extended to the dollar, too. The U.S. Dollar Index jumped 0.8% yesterday to 107.83 and today it is down 0.4% to 107.43.

This is all related we think to the vicissitudes of a holiday market, so take it for what it’s worth. This morning, for debatable reasons, things are worth more or less than they were yesterday.

Originally Posted November 22, 2022 – The vicissitudes of a holiday market are on display

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