Stock indexes swing back to the upside as bulls look to close out another week of gains ahead of Christmas.
Remember, stock, bond, and commodities markets are closed on Monday for Christmas Day. Stock and commodities markets have regular hours today but bond markets close early at 1 p.m. CST.
The schedule for the New Year's holiday the following week is similar with just the bond market closing early on Friday, December 29, then all three closed on Monday, January 1, 2024.
Historically, stocks tend to trend positively into year's end. According to the Stock Trader's Almanac, the so-called "Santa Claus Rally" - which typically occurs during the last five trading days of the year and the first two trading days of the new year - has occurred nearly 80% of years since 1950, resulting in an average gain of 1.3% for the S&P 500.
Bulls hope to find some additional support today in the PCE Prices Index which economists expect will show an outright decline in month-over-month inflation. The would bring the headline inflation rate down to 2.9% year-over-year, and so-called "core" rate to +3.4%.
Some economists point out that a monthly gain of 0% or less would bring the six-month annualized inflation rate down to +2%, equal to the Fed's target rate, which would further cement Wall Street's outlook for rate cuts in the first half of 2024.
There are a handful of other economic reports still to come but the PCE Prices index is really the last potentially market-moving US data of the year.
The remaining data releases in 2023 include New Home Sales and Consumer Sentiment today, followed next week by the S&P Case-Shiller Home Price Index and Consumer Confidence on Tuesday, and Pending Home Sales on Thursday.
There are no significant US earnings releases on the calendar for the remainder of 2023 either.
The one thing that could trip the bulls up in the days ahead might be the brewing shipping crisis at the Suez Canal.
The US is trying to establish some sort of security team that would provide protection for ships transiting the Red Sea but it's not clear when or even if that might happen. But if shippers are forced to keep rerouting goods, inflation may be the big story once again in 2024. The market is currently pricing in over +80% odds of a Fed rate cut at its FOMC meeting March and pricing in over +90% odds of FIVE quarter-point rate cuts by the Fed in all of 2024.
Have a great holiday!
Wishing you and your family all the best in 2024!
Next week we will be using "AI" to generate the commentary- more of an experiment but will return the following week to the traditional format.
The Misery Index Says the Worst Is Over: The misery index, or the sum of the unemployment rate and the inflation rate is ending 2023 at 6.8%. That's its lowest point since the pandemic hit in March 2020 and well below the 8.3% average for the century to date. Unemployment and inflation are the two great causes of real rather than merely vibes-based economic misery. The bottom line is that the double whammy brought by COVID-19, first a huge spike in unemployment, and then a big rise in inflation now seems to be over, with both indicators reverting to low levels indicative of a much more healthy economy. Source Axios
Is a Demographic Time Bomb About to Hit the Beef Industry? A tiny proportion of Americans—particularly boomers—eat the majority of the nation’s beef. The early 1970s were the real heyday of beef in the US. It was the era of stroganoff, stews, and casseroles, steak lunches and 60-cent hamburgers. It was also the beginning of a long decline for the all-American meat. In 1975, Americans on average ate close to 90 pounds of beef each year. That has now dipped to around 57 pounds, and chicken has assumed beef’s place as the most-consumed meat in the US. Let's not forget, we also have the media telling us constantly that pigs and chickens are much better for the environment and global warming than cows. Source Wired
Container Rates Hit $10,000: The ceiling in ocean freight prices shot up in a matter of hours yesterday as a result of more vessels diverting from the Red Sea. CNBC has learned that logistics managers were quoted Thursday morning, ocean freight rates of $10,000 per 40-foot container from Shanghai to the U.K. Last week, rates were $1,900 for a 20-foot container, to $2,400 for a 40-foot container. Truck rates in the Middle East now being quoted are more than double. Alan Baer, CEO of OL USA tells CNBC that during Covid, we had a slower build-up in freight prices due to the impact the pandemic had on the global supply chain, but what we are experiencing here is a light switch event where vessels are being redirected in real time. But, that said, in certain trade lanes you are seeing freight rates going up between 100 to 300%. This does not appear to be totally driven by changes in supply and demand. As of Thursday morning, 158 vessels are currently re-routing away from the Red Sea carrying over 2.1 million cargo containers with cargo based on MDS Transmodal estimates of $50,000 per container is $105 billion. Source CNBC
Angola to Leave OPEC After Production Quota Dispute: Angola said on Thursday it would leave OPEC in a blow to the Saudi-led oil producer group that has sought in recent months to rally support for further output cuts to prop up oil prices. Angola's Oil Minister Diamantino Azevedo said the Organization of the Petroleum Exporting Countries no longer served the country's interests. Oil analysts said the departure raised questions about the unity of OPEC and OPEC+, the wider group that includes Russia and other OPEC allies. OPEC+ will implement a new round of oil-output cuts from January to try to strengthen the market. Three OPEC delegates who spoke on condition of anonymity said Angola's decision to leave came as a surprise, as they had expected the dispute over quotas to blow over. Angola, which joined OPEC in 2007, produces about 1.1 million barrels of oil per day, compared with 28 million bpd for the whole group. Angola's departure will leave OPEC with 12 members and crude oil production of about 27 million bpd, some 27% of the 102 million bpd world oil market. Source Reuters
IRA Unveils "Voluntary Disclosure Program" for Businesses Duped by Tax Credit: The IRS has unveiled a “voluntary disclosure program” for businesses that claimed a pandemic-era tax credit in error and want to pay the money back. Worth thousands per employee, the employee retention tax credit, or ERC, was designed to support small businesses affected by the pandemic. The lucrative tax break sparked a cottage industry of firms pushing employers to wrongly claim the credit. The IRS unveiled a “special withdrawal process” for companies with pending claims in September. The new voluntary disclosure program offers applicants the chance to repay credits received at a 20% discount to cover third-party promoter fees. Sourc CNBC
Track Santa with the Kids the Christmas! Every year, the North American Aerospace Defense Command (NORAD) conducts what's become a favorite holiday tradition for many families. NORAD tracks Santa Claus and provides his real-time location to children all over the world. The 68th installment of NORAD Tracks Santa continues the tradition that began in 1955 when a young child, trying to reach Santa, mistakenly called the unlisted number of Continental Air Defense Command's Operations Center in Colorado Springs, Colorado. Air Force Col. Harry Shoup, who was working the evening shift, took the phone call from a boy who had followed the directions in a local department store's newspaper advertisement that told children how to call Santa — except the number had been printed incorrectly, and instead was for the operations center. Rather than being a Scrooge, Shoup and his team responded to that first child, as well as the many others who called on that first Christmas Eve. In the process, it kicked off a new holiday tradition. The role of tracking Santa then continued when NORAD was formed in 1958, and it's been getting more popular and more technologically savvy ever since. NORAD "tracks" Santa using satellites homed in on Rudolph's nose, which the Department of Defense says gives off an infrared signature similar to that of a missile! NORAD also tracks Santa by using U.S. Air Force F-15, F-16, F-22, and Canadian Royal Air Force CF-18 fighter jets. In fact, NORAD claims their fighter pilots have intercepted Santa many, many times! It's great fun for the kids and from the sounds of it, the good folks at NORAD. The Santa Tracker website also has lots of activities to entertain the kiddos while they wait for Santa. Track Here
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