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Recovery theme stands out, but market loses steam into close
23-Dec-20 16:20 ET
Dow +114.32 at 30129.77, Nasdaq -36.80 at 12771.12, S&P +2.75 at 3690.01

https://www.briefing.com/stock-market-update

[BRIEFING.COM] The stock market rehashed the recovery theme for most of Wednesday's session in which value, cyclical, and small-cap stocks outperformed, but the market finished near session lows as sellers rushed for the exit before the close on no specific news. The S&P 500 finished with a 0.1% gain after being up as much as 0.7% intraday.

The Russell 2000 (+0.9%) and Dow Jones Industrial Average (+0.4%) outperformed with the small-cap index closing above the 2000 level for the first time and at a new record closing high. The Nasdaq Composite (-0.3%) struggled all session amid relative weakness in growth stocks, which generally underperform when recovery stocks are in favor.

The recovery trade was fueled by President Trump's insistence that Congress increase the stimulus checks to $2000 from $600, which House Democrats supported, and Pfizer (PFE 37.44, +0.70, +1.9%) and BioNTech (BNTX 100.06, -0.50, -0.5%) reaching a second agreement with the U.S. government to supply an additional 100 million doses of their COVID-19 vaccine.

The S&P 500 energy (+2.2%) and financials (+1.6%) sectors accumulated most of the gains amid higher oil prices ($48.09/bbl, +1.09, +2.3%) and curve-steepening activity caused by selling in longer-dated Treasuries. Both developments signaled an improved sentiment regarding future economic growth.

The 2-yr yield increased one basis point to 0.13%, and the 10-yr yield increased four basis points to 0.96%. The U.S. Dollar Index decreased 0.4% to 90.34 amid relative strength in the British pound, which rose 1.0% against the dollar amid reports that an outline of a Brexit trade deal with the EU was reached.

Unfortunately, the top-weighted information technology sector (-0.9%) limited the upside in the market, as buyers preferred to focus away from the growth stocks that comprise the technology space. The real estate (-1.0%) and utilities (-0.2%) sectors slipped into negative territory during the afternoon.

An awareness that many European markets, including Germany, will be closed tomorrow for Christmas Eve, and that the U.S. market will close early at 1:00 p.m. ET, might have exacerbated selling interest into the close. Some investors prefer to be cautious heading into extended holiday breaks.

Separately, homebuilding stocks lagged after data showed the pace of new home sales decline 11.0% m/m to a seasonally adjusted annual rate of 841,000 (Briefing.com consensus 990,000). The iShares U.S. Home Construction ETF (ITB 57.07, -0.83, -1.4%) decreased 1.4%.

Reviewing all of Wednesday's economic data dump:

Personal income declined 1.1% m/m in November (Briefing.com consensus -0.2%), personal spending declined 0.4% (Briefing.com consensus -0.2%), the PCE Price Index was unchanged (Briefing.com consensus +0.2%) and the Core PCE Price Index was unchanged (Briefing.com consensus +0.2%).
The key takeaway for the market isn't that the income and spending data were disappointing, it's that the totality of the disappointment will reassure the market that the Fed is going to remain its friend by sticking with extraordinarily accommodative monetary policy.
Initial claims for the week ending December 19 decreased by 89,000 to 803,000 (Briefing.com consensus 860,000). Continuing claims for the week ending December 12 decreased by 170,000 to 5.337 million.
The key takeaway from the report is the week-over-week improvement in both initial claims and continuing claims. Both are still way too high in the big picture, yet the trend is the market's trading friend today.
New home sales decreased 11.0% m/m to 841,000 in November (Briefing.com consensus 990,000) from a downwardly revised 945,000 (from 999,000) in October. On a yr/yr basis, new home sales were up 20.8%.
The key takeaway from the report is that new home sales, which are counted when contracts are signed, slowed in November from a torrid recovery pace. Limited supply and rising prices had some impact, yet the strength of the market continues to be evident in the 20.8% increase in sales yr/yr.
New orders for durable goods increased 0.9% m/m in November (Briefing.com consensus 0.7%) while new orders, excluding transportation, increased 0.4% (Briefing.com consensus 0.5%).
The key takeaway for the market is that there were order increases across most categories and that business spending stayed on a positive track, evidenced by the 0.4% increase in new orders for nondefense capital goods excluding aircraft.
The final reading for the December University of Michigan Index of Consumer Sentiment was revised down to 80.7 from the preliminary reading of 81.4. The final reading marks an improvement from the final reading of 76.9 for November.
The key takeaway from the report is that consumer sentiment was improved from November, notwithstanding the reports of rising coronavirus infections and deaths, as well as the stimulus uncertainty, that prevailed during the survey period.
The FHFA Housing Price Index for December increased 1.5% following an unrevised 1.7% increase in November.
The weekly MBA Mortgage Applications Index increased 0.8% following a 1.1% increase in the prior week.

Investors will not receive any economic data on Thursday, which will be a shortened trading session for Christmas Eve.

Nasdaq Composite +42.3% YTD
Russell 2000 +20.3% YTD
S&P 500 +14.2% YTD
Dow Jones Industrial Average +5.6% YTD

Market Snapshot
Dow 30129.77 +114.32 (0.38%)
Nasdaq 12771.12 -36.80 (-0.29%)
SP 500 3690.01 +2.75 (0.07%)
10-yr Note -3/32 0.956
NYSE Adv 2115 Dec 997 Vol 813.0 mln
Nasdaq Adv 2344 Dec 1378 Vol 6.9 bln

Industry Watch
Strong: Energy, Financials, Industrials
Weak: Information Technology, Real Estate, Utilities

Moving the Market

-- Value, cyclical, and small-cap stocks outperformed, but market lost steam into the close on no specific news

-- President Trump called on Congress to increase stimulus checks to $2000 from $600

-- Pfizer (PFE) and BioNTech (BNTX) reached a second agreement with the U.S. government for an additional 100 million doses of vaccine

-- Treasury curve steepens amid selling in longer-dated maturities, oil prices rise

Energy stocks fueled by higher oil prices
23-Dec-20 15:25 ET
Dow +209.54 at 30224.99, Nasdaq +10.51 at 12818.43, S&P +16.38 at 3703.64

[BRIEFING.COM] The major indices continue to sport modest gains, while President Trump recently vetoed the National Defense Authorization Act. Note, Congress has enough votes to override his veto next week assuming all members vote the same way.

One last look at the S&P 500 sectors before the close shows energy (+2.4%) and financials (+1.8%) still atop the leaderboard as part of today's recovery trade that has boosted oil prices and steepened the Treasury yield curve. Conversely, the information technology (-0.3%), real estate (-0.5%), and utilities (-0.03%) sectors trade lower.

WTI crude futures settled today's session higher by 2.3%, or $1.09, to $48.09/bbl.