The Market Today

TODAY’S CALENDAR

Home Price Gains Expected to Remain High: Home price gains are expected to remain high but continue moderating in the October reports from the FHFA and S&P CoreLogic.  Set for release at 8:00 a.m. CT, both reports are expected to show price gains of 0.9% MoM.  If correct, the S&P CoreLogic HPI YoY rate would drop from 19.05% to 18.50%.  The index peaked in July at 20.00%. At 9:00 a.m., the Richmond Fed’s December Manufacturing Index is expected to hold at its moderate level.

CORONAVIRUS UPDATE  Vining Sparks Coronavirus Chartbook and Vining Sparks Coronavirus State Charts

CDC Shortens Isolation Period: Airline stocks were among the few sub-sectors to lose value Monday as additional flight cancellations continued a trend that disrupted holiday travel over the weekend. The major airlines cited bad weather and virus-related staff shortages as reasons for the widespread cancellations. Dr. Fauci made waves after saying a vaccine mandate for domestic travel “is something that seriously should be considered.” The CDC shortened the recommended isolation period for asymptomatic infected persons to five days from ten and said vaccinated individuals who had received a booster shot need not quarantine after exposure. Goldman will require employees to get a booster by February 1 and increased the frequency of mandatory testing. Apple closed retail stores in New York City amid rising cases. In Europe, Greece announced new measures and France will require workers to work from home for three days a week for a three-week period starting January 3. The U.K. confirmed it will not implement any new restrictions before the new year.

OTHER ECONOMIC NEWS

Dallas Fed Manufacturing Index Moderates Unexpectedly, Despite Stable Employment: The Dallas Fed’s Manufacturing Index fell 3.7 points in December to 8.1, disappointing expectations for a small gain and marking the fourth lowest level of 2021. Within the details of the report, shipments led a moderation across activity indicators compared with November while the employment indices posted marginal gains. The prices paid index fell sharply to its lowest level since March. However, supplier delays increased and remained elevated and prices charged on sales to customers were stable near pandemic highs. Except for stronger employment, most metrics looking ahead six months moderated.

TRADING ACTVITY

Ten-Year Treasury Yield Dips Even as Short Yields Climb and Stocks Set Another Record: U.S. equities rallied Monday, a positive start to what is historically a strong seasonal stretch for the stock market. Coined the “Santa Claus” rally, the last five days of a year and the first two days of the subsequent year have proven to be better for the bulls than the bears. According to CNBC, the Santa Claus rally “has produced positive returns 34 of the past 45 years for an average return of 1.4%.” Monday’s strength pushed the Dow up 1.0% and lifted the Nasdaq by 1.4%. The S&P 500 also gained 1.4%, notching its second consecutive record close. Energy companies led the broad charge that saw all eleven sectors of the index gain value. Oil prices jumped more than 2% on the day to send U.S. WTI up above $75 a barrel, its highest close since the emergence of Omicron sent the commodity tumbling from around $80. Since a stumble last Monday, the S&P 500 has risen in four consecutive sessions and gained nearly 5% amid growing evidence Omicron may be less severe than feared. Despite the recent strength for the stock market, longer Treasury yields have been held in check and posted small declines to start the week. The 2-year yield faded from higher levels after a solid lunchtime auction, adding 1.1 bps to 0.70%, a new cycle-high. The 10-year yield, however, dipped 1.7 bps to 1.48%.

Monday’s market merriment transferred over into Tuesday’s global session, lifting stocks across Asia and Europe by more than 0.5%. U.S. futures are signaling another positive start for the major equity indices. Nasdaq futures rose 0.6% while the Dow and S&P 500 added 0.3%. Treasury yields were essentially flat at 7:30 a.m. CT, unwinding a modest rise that had pushed the curve up by less than 1 bp earlier in the session. An auction of 5-year Treasury notes at 12 p.m. CT could impact yield trends midday.