December 18, 2024

We are living through history here as the Dow set a record as it declined for the ninth straight session for the first time since 1978 and led the way lower for the market. Tis pathetic performance resulted in a 267 loss down to 43,449 and was led by UNH (and what else is new?), CAT, CRM, GS, HD and HON after its recent up-day.

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The S&P came down by 23 to 6050 despite gains in the two largest components, AAPL at a new all-time high and MSFT as well, along with seemingly unstoppable TSLA. But weakness in financials and energies knocked things back and NVDA has now entered a correction with a decline in excess of 10% as this one has really cooled down.

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The Nasdaq went south by 65 to 20,109 for basically the same reasons as the S&P, on weakness in most of the large technology stocks as AVGO finally cooled off after making new highs on its recent strong earnings report from late last week.

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The Russell 2000 Index of small stocks once again did nothing with a 28 point decline down to 2334 on weakness in financials while the VIX keeps rolling along to the upside at 15.87 which just goes to show how that 13 downside support area held beautifully.

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NVDA has now lost its luster which was a main reason for the record highs until recently. This was its eighth loss in nine days for the stock, which has dropped more than 12% from its record set last month, as its moonshot momentum slows.

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Like the overall U.S. market, Nvidia’s stock had climbed so much that critics warned expectations had become too high and that the stock price makes sense only if everything goes correctly for it from here.

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Across a survey of global fund managers, strategists at Bank of America found many moving into U.S. stocks and pulling out of their cash reserves to do so. The survey found fund managers are holding a notably small percentage of their overall portfolios in cash, similar to 2002 and 2011, which preceded tougher times for riskier investments.

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The survey’s broadest measure of optimism, based on expectations for economic growth and other indicators, is at its highest level since August 2021. That is a potentially concerning signal for contrarians.

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The S&P is on track for one of its best years since the millennium, up nearly 27%, because the U.S. economy has remained remarkably resilient, hopes are high that the new President’s policies will boost growth but not inflation too badly and the Federal Reserve has begun to make things easier by cutting interest rates from a two-decade high.

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The Fed is widely expected to announce the third cut of the year to its main interest rate at 2pm today, and officials are also scheduled to unveil projections about where they see rates heading in upcoming years.

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Expectations for coming cuts have been on the downswing, though, as the perception is that inflation looks like it could stubbornly stick above the Fed’s 2% target after slowing sharply from its peak above 9%.

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A report yesterday showed that retail sales went up by more than expected at 0.7% but only 0.2% excluding autos. That could be an indication of an economy that doesn’t need much more help from easier interest rates. While lower rates can goose the economy, they can also give inflation more fuel.

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In the bond market, Treasury yields held relatively steady following the report. The 10-year Treasury yield held at 4.40%, where it was late Monday. The two-year yield, which more closely tracks expectations for the Fed, edged down to 4.24% from 4.25%.

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AVGO fell by 4% for its first loss following two big gains where it had led the market. The tech company’s stock leaped by 24% and then by 11% in consecutive days after delivering a profit report and a forecast for upcoming revenue that topped analysts’ expectations, in part because of demand for its artificial-intelligence products.

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Of all things, PFE helped limit the market’s loss after rising 5% after it gave a forecast for profit next year that was stronger than some analysts’ estimates. Other pharmaceutical stocks were also near the front of the market, including a 3% gain for Bristol-Myers Squibb.

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In stock markets abroad, London’s FTSE 100 fell 0.8% ahead of an announcement on interest rates by the Bank of England tomorrow.

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Japan’s central bank will also meet on interest rates later this week, and Tokyo’s Nikkei 225 slipped 0.2%. Unlike others around the world, the Bank of Japan is raising rates after keeping its policy rate below zero for years.

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Bitcoin set a record above $108,000 before pulling back toward $106,500, according to CoinDesk.com. It has catapulted from roughly $44,000 at the start of the year, riding a recent wave of enthusiasm that the new President will create a system that is more favorable to digital currencies. And once again, the shares of MSTR faltered again after a huge gain earlier this year and IBIT, a bitcoin trust, seems to be a more steady bet here.

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Earnings this week will see: today - GIS, LEN down and JBL and MU higher; Thursday – KMX, CAG, FDS, FDX, PAYX and Dow component NKE.

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Economic reports will have: yesterday – November retail sales were up by 0.7% while ex-autos were up by 0.2%, November industrial production fell by 0.1% and capacity utilization slipped to 76.8 which was the lowest in three years; today - November housing starts were lower and building permits, which are an indicator of future activity were higher than expected, and the Fed interest rate decision at 2pm; Thursday – final estimate of 3Q G.D.P., November L.E.I., weekly jobless claims; Friday – November personal income and spending.