by Pinchas Cohen
Key Events
Yesterday, as global stocks kicked off the last full week of trade for 2017 by proceeding full steam ahead, all four U.S. major indices posted record closes. As well, save for the small cap Russell 2000, they also all hit new record highs. As the year winds down, it's becoming apparent that this has likely been the best year for stocks since 2013.
Global Financial Affairs
All four indices opened higher, forming a rising gap signaling everyone was buying at current price levels but no one was selling. The S&P 500 gapped up 0.38 percent, extending its advance to 0.7 percent but gains were pared to 0.53 by the close, forming a bearish shooting star, suggesting that by the end of the day bears had the last word. It looked as though the market thought investors had gone too far. Still, the SPX hit its 62nd record for the year.
The Dow Jones Industrial Average gapped up 0.36 percent, extending its advance to 0.91 percent but gains were trimmed to 0.57 percent by closing time, forming a shooting star. This was the Dow's 69th record for the year.
The NASDAQ Composite gapped up 0.63 percent and extended the advance to 0.84 percent. This was its 71st record for the year.
The Russell 2000 outperformed, likely on the prospect of its listed companies enjoying the tax cuts that appear to be all but a sure thing once US President Donald Trump's tax reform agenda is enacted, possibly before Christmas, after midweek votes on the measure occur in the House and Senate. The index gapped up 0.92 percent at the open and extended the advance to 1.37 percent by the time trading finished for the day. This was the Russell's 24th record, its first since November 30.
This morning, Asian equities presented a mixed picture. Japan’s Nikkei 225 and South Korea’s KOSPI fell, while Australia’s S&P/ASX 200, Hong Kong’s Hang Seng and China’s Shanghai Composite all advanced. Emerging markets extended yesterday’s gains.
In Europe, travel and telecom stocks led the Stoxx Europe 600 higher, as eurozone core bonds fell.
The euro extended yesterday’s gains, as it resumes the formation of the right shoulder of a potential H&S top.
Sterling remains between a rock and hard place—the opposing forces of supply and demand, with Brexit efforts rumbling on. As the currency nears a trading range in the shape of a descending triangle since the start of the month, it has climbed higher as well as fallen lower but settled, for now, near its opening price, forming a High Wave candle, indicating a lack of leadership.
South Africa’s rand fell today after yesterday gaining the most since March, as Cyril Ramaphosa won the ruling African National Congress party’s leadership contest. See yesterday's explanation, here, as to why the US dollar may continue to weigh on the rand.
The price of WTI crude has been trading around $57 a barrel, ahead of API stockpiles data, released later today, which is expected to show that the US's oil inventory fell for a fifth week. Technically, oil appears to be forming a symmetrical triangle, whose upside breakout would signal a resumption of the prior uptrend.
Industrial metals fell for the first time in nine sessions.
Copper slipped after reaching a downtrend line since October 16, the head of a potential H&S top.
As markets head toward the final stretch of 2017, the biggest investor focus remains progress on tax reform, which appears to be inching toward a final denouement. The House is scheduled to vote later today on the bill, following a floor debate this morning. Then the bill goes to the Senate, where Republican leaders intend to bring it up just as soon as they get it.
Investors have been riding the market hard this year, propelling it to unexpected heights. Will they be able to maintain this momentum through year-end?
Up Ahead
- The U.S. and U.K. release updated estimates of third-quarter GDP on Thursday and Friday respectively.
- The Bank of Japan meets on Thursday to set monetary policy.
- The U.S. House will vote Tuesday on the Republicans’ final tax package. The Senate may also vote Tuesday or on Wednesday, Bloomberg BNA reported.
- Germany's December Ifo Business Climate Survey was released this morning. It came in at 117.2, a hair below expectations.
- Catalonia’s secessionists are at risk of becoming a minority in the Spanish region’s parliament with the main pro-unity party set to add seats in Thursday’s election.
Market Moves
Stocks
- The Stoxx Europe 600 Index climbed 0.1 percent as of 8:09 London time (3:09 EST) to the highest in almost six weeks.
- The U.K.’s FTSE 100 jumped 0.2 percent to the highest in six weeks.
- Germany’s DAX gained 0.1 percent to the highest in almost six weeks.
- Japan’s Nikkei 225 Stock Average fell 0.1 percent.
- The MSCI Asia Pacific Index jumped 0.2 percent to the highest in more than three weeks.
- The MSCI Emerging Markets Index increased 0.4 percent to the highest in almost three weeks.
- S&P 500 Futures increased 0.1 percent to 2,696.00, the highest on record.
Currencies
- The Dollar Index extended yesterday’s decline 0.13 percent to a total of 0.36 percent.
- The euro climbed 0.2 percent to $1.1805.
- The British pound gained 0.1 percent to $1.3397.
- The Japanese yen was unchanged at 112.55 per dollar.
Bonds
- The yield on 10-year Treasuries declined one basis point to 2.39 percent.
- Germany’s 10-year yield advanced one basis point to 0.32 percent.
- Britain’s 10-year yield climbed one basis point to 1.158 percent.
- Japan’s 10-year yield was unchanged at 0.042 percent, the lowest in more than two weeks.
Commodities
- West Texas Intermediate crude gained 0.4 percent to $57.40 a barrel, the highest in more than a week.
- Gold increased 0.1 percent to $1,264.02 an ounce, the highest in two weeks.
- Copper fell 0.6 percent to $3.13 a pound.