Wednesday wasn't so much a hump day as it was a bump day considering how the tech stocks got bumped off their high perch while a host of financial, retail, and industrial stocks got bumped up at their expense. It was a remarkable trade rooted in sector rotation and an aim to get reacquainted with value stocks based on an improved economic outlook.
The latter flowed from the upward revision to the Q3 GDP report and optimism over tax reform efforts.
A steepening yield curve, a 3.3% surge in the Dow Jones Transportation Average, and a 1.8% gain in the S&P 500 financial sector were some of the more notable manifestations of the economic drive in Wednesday's market.
That drive has continued this morning; and some might say the bulls are on cruise control at the moment.
The S&P futures are up eight points, the Nasdaq 100 futures are up 24 points, and the Dow Jones Industrial Average futures are up 114 points, placing the major indices on track to register opening gains in the neighborhood of 0.2% to 0.4%.
In a number of respects, the upside bias has similar undertones from yesterday.
Economic data has been generally supportive, Kroger (KR) has kept the lights on for value stocks with its better-than-expected earnings report and outlook, and the GOP tax bill in the Senate has progressed to a full debate on the floor after clearing a procedural vote along party lines. An actual vote on the bill by the full Senate is expected early Friday.
With respect to the economic data, the overnight focal point was China's better-than-expected manufacturing and non-manufacturing PMI reports for November. There has been a shift this morning, however, to the Personal Income and Spending and Initial Claims reports out of the U.S.
Both reports fit the view that the economy, aided by a strengthening labor market, is progressing at a solid pace. That point notwithstanding, inflation continues to be depressed.
- Personal income increased 0.4% in October (Briefing.com consensus +0.3%), driven by a 0.3% increase in wages and salaries. Personal spending rose 0.3%, as expected.
- The PCE Price Index was up 0.1%, as expected, leaving it up 1.6% year-over-year, versus up 1.7% in September.
- The core PCE Price Index, which excludes food and energy, increased 0.2%, as expected, and was up 1.4% year-over-year for the second straight month.
- On a year-over-year basis, real disposable personal income was up 1.6%, versus 1.1% in September, and real PCE was up 2.6%, unchanged from September.
- The personal savings rate jumped from 3.0% to 3.2%
- Initial claims for the week ending November 25 decreased by 2,000 to 238,000, which was in-line with the Briefing.com consensus estimate and the 143rd straight week they have been below 300,000.
- Continuing claims for the week ending November 18 increased by 42,000 to 1.957 million
The Treasury market took the economic news in stride for the most part, although it remains a bit on the softer side with the yield on the 10-yr note pushing up one basis point to 2.39%.
The behavior of the Treasury market, as well as the meeting between OPEC members and Russia today to discuss their production cut agreement, will be watched closely by market participants, but perhaps not as closely as the behavior of the stock market (and Bitcoin), which is spreading some yuletide cheer in more ways than one.