The stock market is making all kinds of history this week that is a perfect reflection of the pickup in volatility seen in 2018. Hot on the heels of the worst losses ever registered on Christmas Eve, the market scored its biggest gains ever on the day after Christmas; in fact, the Dow Jones Industrial Average posted its biggest point gain ever!
Wednesday's rally was a sight for the sore eyes of market bulls and it left everyone with a sense of wonderment about what today will bring. Thus far, it appears that today will bring renewed selling at the open.
The S&P futures are down 35 points and are trading 1.5% below fair value. The Dow Jones Industrial Average futures are down 326 points and are trading 1.4% below fair value. The Nasdaq 100 futures are down 90 points and are trading 1.5% below fair value.
Wednesday's session certainly was successful in cutting this year's losses. The major indices soared 5% or more in a massive buying spree that some attributed to pension fund rebalancing activity, an overdue bounce from deeply oversold conditions, and some assurances that the jobs of Treasury Secretary Mnuchin and Fed Chair Powell are "safe."
It says a lot about where we have come from when the market breathes a sigh of relief upon hearing the Treasury Secretary and Fed Chair aren't going to lose their jobs. Alas, here we are, as that means something more than ever in these closing days of 2018.
There isn't any personnel news to focus on this morning. As it so happens, there isn't much news in general to focus on this morning.
There is a fog layer of growth concerns, however, that has rolled in again from foreign shores.
China reported a 1.8% yr/yr decline in industrial profits in November, which is the first decline in three years; the ECB issued an economic bulletin in which it pointed to an outlook for slower global growth in 2019; and Bank of Japan (BOJ) Governor Kuroda reportedly left an impression with recent remarks about market activity that the BOJ could potentially ease monetary policy in 2019.
Oil prices ($45.16, -$1.06, -2.3%) are backing up again and so are copper prices ($2.69, -$0.02, -0.6%). The partial government shutdown persists in the U.S. and reports are starting to highlight how an extended shutdown could negatively impact business investment plans.
The Department of Commerce has been impacted by the shutdown; consequently, releases put out by the Bureau of Economic Analysis and the Census Bureau, like the New Home Sales report for November that was supposed to be released today, are being delayed until funding is received.
The Department of Labor is still running, which explains why the weekly initial claims report was released today. It was a decent report, too.
Initial claims for the week ending December 22 decreased by 1,000 to 216,000 (Briefing.com consensus 225,000) while continuing claims for the week ending December 15 decreased by 4,000 to 1.701 million.
The key takeaway from the report is that initial claims continue to print at low levels that don't suggest any meaningful softening has occurred in the labor market despite the concerns about a slower growth outlook.
The futures market didn't react much to the data. It remains locked in with a negative pre-market bias, perhaps caught up in the idea that dramatic upside days like Wednesday often take place in the context of a bear market.
Wednesday's rally might have been an historic one, yet the bulls still have much to prove to regain control of the narrative and the tape.