U.S. equities drifted aimlessly on Tuesday, with large-caps climbing for the fourth-straight session, but action subdued ahead of the Christmas break next week and with all the excitement over in bitcoin and other cryptocurrencies.
We also have the Federal Reserve policy meeting on Wednesday, likely to feature another interest rate hike, an update to future rate projections and economic estimates, and what is likely to be one of the last Q&A sessions from Fed chairman Janet Yellen. Watch for comments on the bitcoin craze.
In the end, the Dow Jones Industrial Average gained 0.5%, the S&P 500 gained 0.2%, the Nasdaq Composite lost 0.2% and the Russell 2000 lost 0.2%. Treasury bonds were unchanged, the dollar outperformed, gold lost 0.4% and crude oil fell 1.5%.
Breadth was negative, with decliners outpacing advancers by a 1.2 to 1 ratio on in-line volume, with NYSE activity at 102% of its 30-day average. Defensive telecom stocks led the way with a 2.8% gain, while utilities were the laggards, down 1.8%.
Hard-drive maker Seagate Technology PLC (NASDAQ:STX) gained 4.1% on a restructuring plan. Verizon Communications Inc. (NYSE:VZ) gained 2.6% on an upgrade from analysts at Nomura on better subscriber growth and cost control. And Boeing Co (NYSE:BA) gained 2.4% on a 20% increase to its dividend and a new $18 billion share buyback plan.
On the economic front — adding to the impression that monetary policy is going to turn increasingly hawkish here amid labor market tightening — headline producer price inflation increased at its highest level in nearly six years, increasing to a 3.1% year-over-year rate. That’s the fastest increase since 2012, fully eclipsing the 2014 oil price collapse and the wet blanket effect it had on prices.
Should Yellen turn hawkish tomorrow, which is likely given the increasingly frightening rise in bitcoin from a financial stability perspective in the context of historically high valuations in public equities, compressed bond spreads and ebullient sentiment, the U.S. dollar is likely to be the main beneficiary.
Smart traders could already be pre-positioning, with the dollar up for the seventh straight day today for the longest rally since January 2016.
Should the dollar’s run continue, it will suck much of the air out of bitcoin since it’s seen as a private market, decentralized, anti-fiat alternative to the Fed’s paper money.
Check out Serge Berger’s Trade of the Day for Dec. 13.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
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