Futures vs FV: SP
A new trading year in the US and lots of optimism with Dow futures up 150+ points. In addition, the trades at the end of the year related to the rebalance are now off and you see bonds slumping back down and stocks rebound; one of the reasons we were holding our positions through year end if at all possible.
Dollar is surging. Oil is surging.
Oil: Another higher high as Oman and Kuwait announce oil cuts as the deal is trying to stick.
China: Caixin PMI 51.9 vs 50.7 exp vs 50.9 prior. This is receiving a lot of credit for the Tuesday moves, but it is just part of the picture.
Singapore Q4 GDP: 9.1% vs 3.7% exp vs -1.9% prior. That is some big news.
Australia PMI: 55.4 vs 54.2 prior.
World output looks better if you can believe the numbers.
GM: Trump tweets it needs to bring production of a certain model back to the US or face a border tax. GM responds that most of that model are made in the US. Okay, how much is 'most'? 90%? 51%? One would hope this kind of social media diplomacy is just a prelude or positioning for a larger move relating to NAFTA and taxes, making it more conducive to place business in the US once again.
Upgrades: DIS, VZ
Politics: President is supposedly being urged by some to appoint his Supreme Court choice during the last recess of the current Congress. That will go over well, but who knows given the political climate today?
OTHER MARKETS
Bonds: 2.509% vs 2.42% 10 year. The rebalance trade is clearly off as the bond rally to end 2016 ends abruptly.
EUR/USD: 1.0385 VS 1.05289.
USD/JPY: 118.17 vs 116.739
Oil: 55.12, +1.40
Gold: 1150.10, -1.60
Futures started higher on the early open, moved even higher though they have backed off that morning high. Plenty of bids to start the new US stock year as new money is put to work post-year end rebalance. This move likely has more staying power than those upside attempts to end last year, and Dow 20K is once again on the burner.
The question will be what areas move higher in the new year. We have some of the 'old' rally stocks that started the move currently working and cover several sectors in our plays that have not yet been put to work as well as some new plays on the 'old' rally leaders (e.g. DIS, some energy). Again, we will see which areas get the bids and importantly which areas hold the moves.
ISM December and Construction spending November out at 10ET.
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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