- Chinese Industrial Production and U.S. Housing Starts helping stocks move higher
- December housing Starts of 1.61 million beat the 1.38 million estimate and were the highest in 13 years
- Industrial production fell 0.3% more than the 0.2% forecast decline
- Stocks hit new intra-day records earlier and are trying for a fifth consecutive record close
Stocks have closed at record highs each day this week so far, and if the market can inch higher to earlier levels, we’ll see five consecutive record closes. There is a global rally in share prices as positive Chinese economic industrial production data is being matched with improving U.S. data and expectations of a better global economy. Citizens Financial and State Street Corp joined the parade of (mostly) positive bank earnings this week. Industrial-focused names Fastenal and JB Hunt also reported, and are trading lower while railroad Kansas City Southern is trading higher despite an earnings miss and peer company is CSX is flat after a revenue miss.
Outside of the equities market, the U.S. will begin issuing 20-year bonds during the first half of this year and the Treasury is also evaluating other options. Despite the large and growing U.S. deficits, there is an appetite from institutional investors for longer dated, risk free debt that does not have a negative yield. While global total debt with negative yields is down from just over $17 trillion to $11.6 trillion, this 20 year bond fits into market structure more easily that an earlier proposed 100-year bond. The 20-year bond is not brand new. The Treasury issued them prior to 1986, when they were replaced by 30-year bonds. The U.S. issued 40 and 50-year bonds in the past in case you are wondering.
In the U.S., December housing starts were 1.61 million, well above the 1.38 million forecast and the 1.38 million (revised higher) November reading. A mild winter helped last month to the highest reading in 13 years. I also suspect it has a hand in today’s rally. U.S. industrial production fell 0.3%, modestly more than the 0.2% expected but the market does not seem to care, or more to the point is looking ahead to better data in the future. Capacity Utilization of 77.0% was in line with expectations. Job openings fell to 6.8 million in November vs. a 7.3 million share estimate. Voluntary separations gave remained high indicating continued confidence in the job market. Finally, University of Michigan sentiment (January Preliminary) came in at 99.1 vs. a 99.3 estimate.
Spot Gold and the U.S. dollar index are both higher today in what looks like a belief that we’ll see better global growth in 2020. We’ll hear more from business leaders starting next week at the World Economic Forum in Davos staring on Monday, which incidentally is a U.S. exchange holiday. I’ve come to rely on this post-holiday three day weekend for my mental sanity. It also makes watching the NFL championship games a little more fun.
Health Care and Energy are the only sectors that are not in positive territory. As we noted, yesterday, getting all 11 sectors to move higher in a given day is not easy. Energy is the only group not higher for the week so far. Tech and Materials are among the leaders but its notable the REITS and Utilities have gained even more since last Friday’s close.
Please note that we will be retiring the Midday note in its current form and going back to providing you intra-day commentary from our partners at Briefing.com before the end of the month. We love writing this note but it takes time that we need to spend focusing on customers. Please always feel free to contact your Market Intelligence Desk director to discuss trading in your stock and the market overall.
Brian’s Technical Take
Bitcoin is up 10.4% this week following last week’s gain of 10.6%. This week’s gains have broken out above the declining trend line originating from the June 2019 highs, but over the last four sessions it has been glued to the 200-day moving average. After declines in five of the prior six months, bitcoin is currently +25% MTD which is chump change relative to its historical performance.
Over the first six months of 2019 bitcoin gained 341% from its late December 2018 lows before finishing the year with +95%. Just two years earlier in 2017 bitcoin gained more than 1,400%. What will 2020 bring?
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Charles Brown is Associate Vice President on The Market Intelligence Desk with over 20 years of equity capital markets experience. Charlie has extensive knowledge of equity trading on both floor and screen-based marketplaces. Charlie assists with the management of The Market Intelligence Desk and works with Nasdaq listed companies providing them with insightful objective trading analysis.
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Brian Joyce, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Before joining Nasdaq, Brian spent 16 years as an institutional trader executing equity and options orders for both the buy side and sell side. He also provided trading ideas and wrote technical analysis commentary for an institutional research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Transportation companies, among others, understand the trading in their stock. Brian is a Chartered Market Technician (CMT).
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