The Japanese yen carry trade, in which one barrows low cost yen to speculate in foreign markets with higher interest rates or slower money printers, is performing well today as it goes almost tick for tick with the S&P 500.
Read MoreOne way we measure the internal condition of the stock market is to measure the percent of issues that are trading above their own various moving averages. In the below charts we measure the percent of issues trading above their respective 50-day moving averages to get a sense of short to intermediate-term overbought/oversold conditions.
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One day does not make a trend, but we are surprised by the market’s reaction to the notably good payroll, personal spending, consumer confidence, and GDP data released recently. Specifically, we have stocks up 1.1%, the dollar unchanged, and bond yields anchored to 2.88 on the ten year treasury.
Read MoreWe highlighted yesterday that spending on services was precariously close to signally a recession in the US (link). The good news is the first data point for the fourth quarter shows spending on services increased by 0.2% month-over-month and is 1.14% higher than it was a year ago. Overall real PCE increased by 0.3% month-over-month.
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Today’s employment and personal income and outlays reports may be strong enough for the Fed to begin tapering later this month. November employment came in at 203k jobs and the unemployment report dipped to a 5-year low (7%).
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US corporate profit margins are at their second highest level ever at 10.14%. The highest level was reached in the 4Q11 when profit margins spiked to 10.27%. 4-year annualized growth of profits have slowed from 19.4% to 10.1% in just three quarters.
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The second release for the 3Q GDP was revised up today from 2.8% AR to 3.6% AR. This increase is mainly attributable to further inventory accumulation. Personal consumption expenditures on services only contributed 2 basis points to real GDP. This is the lowest contribution since 2009.
Read MoreOver the last few years the range of intraday price swings for the S&P 500 (the intraday high minus the intraday low) has been a good indicator of short to intermediate term peaks and troughs in the market.
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It is common for equity prices and inflation expectations to generally move in the same direction. Stock prices are a leading indicator for economic activity.
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ADP payroll data surprised to the upside today (215k vs 185k expected). It was the highest reading so far this year. Perhaps most encouragingly the gain was lead by small businesses. ISM Non-Manufacturing survey came in slightly below expectations (53.9 vs 55.5 expected).
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