The futures market is pointing to a relatively flat start for the cash market. The S&P futures are up one point, the Nasdaq 100 futures are flat, and the Dow Jones Industrial Average futures are down two points.
The common thread in those indications is that there isn't much conviction behind the trade -- and that shouldn't come as any real surprise.
The Christmas holiday is Monday. Capital markets will be closed that day, meaning market participants will get the benefit of a three-day weekend. For many participants this time of year, though, they are claiming the additional benefit of a week, or possibly two weeks, off.
The relevant connection for those sticking around to trade/play/gamble in the stock market is that trading conditions will be thin as liquidity dries up. That means there is potential for outsized moves in individual stocks, which is exactly why some opportunistic participants aim to stick around to trade/play/gamble in the stock market during the holiday period.
It hasn't escaped those participants either that this is a typically favorable period for the stock market. It is the root of what has been deemed by the Stock Trader's Almanac to be the "Santa Claus" rally period.
That period covers the last five trading days of the year and the first two trading days of the new year. Since 1969, that period has produced an average gain of 1.6% for the S&P 500.
Considering that it's an "average gain," it is worth remembering that the Santa Claus rally period hasn't always materialized, so one can't take it as a foregone conclusion that the only way is up for the stock market over the next seven trading sessions.
The latter point notwithstanding, we suspect optimism is high that Santa Claus will show up this year since the stock market has defaulted to a bullish bias all year long. Then again, with the rally in anticipation of the tax bill passing, it can be argued that Santa Claus came early this year and is ready to settle in for a nap.
We'll be interested observers of what happens over the next seven trading sessions, yet we won't bother to offer a forecast because that's as foolish as Frosty taking refuge in a greenhouse.
We'll take things one day at a time, and on this day, it is fair to say there isn't much that is moving the broader market.
The earnings report and guidance from Nike (NKE), which was somewhat mixed, isn't. The news that Congress approved a continuing resolution to fund the government through January 19, thereby averting a shutdown tonight, isn't. And this morning's economic data, which includes the Personal Income and Spending and Durable Orders reports for November, isn't.
Personal income increased 0.3% (Briefing.com consensus +0.4%) following an unrevised 0.4% increase in October. Personal spending jumped 0.6% (Briefing.com consensus +0.4%) following a downwardly revised 0.2% increase (from 0.3%) in October. The personal savings rate dropped to 2.9% from 3.2%.
The PCE Price Index was up 0.2% (Briefing.com consensus +0.3%), leaving it up 1.8% year-over-year versus up 1.6% year-over-year in October. The core PCE Price Index, which excludes food and energy, increased 0.1% (Briefing.com consensus +0.2%) and was up 1.5% year-over-year versus up 1.4% year-over-year in October.
The key takeaway from the report lays in the upward drift of the PCE Price Index. It is moving closer to the Fed's 2.0% longer-run target, which is supportive of the Fed's inclination to pursue an upward drift in the target range for the fed funds rate.
Separately, durable orders increased 1.3% (Briefing.com consensus +2.1%) while orders excluding transportation declined 0.1% (Briefing.com consensus +0.4%). Those weaker-than-expected readings for November, however, were offset to a large extent by upward revisions to October, so they weren't necessarily that far out of line with prevailing expectations in front of the November report.
The key takeaway from the report is that it will still compute as a positive input for Q4 GDP forecasts since shipments of nondefense capital goods orders excluding aircraft increased 0.3% on top of a 1.3% increase in October.
To be sure, there have been a lot of positive inputs for equity investors this year. The most relevant input has been the outsized gains in the major stock indices, which have been commensurate with Santa's jovial spirit and outsized belly.