The stock market thinks it can, but will it?

The stock market looked good for a while yesterday, but its best moments (literally) were at the start of trading. After that, it was a steady reversal of the early gains and then some. The closing bell rang with the major indices staring at modest losses. A 0.2% decline in the Russell 2000, however, belied a larger pullback from an early 1.8% gain.

The trade itself, which happened against a backdrop of falling long-term rates, was the picture of a consolidation trade. The indices thought they could, thought they could, thought they could, but they just couldn’t muster enough power to get over the hill and fell back on profit-taking interest.

It happens, especially after a run like we have witnessed since late October.

The early indication today is that the market will start today’s session in a mixed fashion. Currently, the S&P 500 futures are up 14 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up 98 points and are trading 0.7% above fair value, and the Dow Jones Industrial Average futures are up three points and are trading roughly in-line with fair value.

This, too, is the picture of a consolidation trade. There isn’t a lot of conviction on the part of buyers and there isn’t a lot of conviction on the part of sellers. Accordingly, the market is churning, waiting it seems for a new catalyst to give it some new direction for either a breakout or a breakdown.

There is an old catalyst in play again this morning. That would be the relative strength of the mega-cap stocks. They are driving the outperformance of the Nasdaq 100 futures, but an old stumbling block — the lethargy of many other stocks — is keeping the broader market in check.

There was some familiar economic data released this morning. That would be the weekly initial and continuing jobless claims report.

Initial jobless claims for the week ending December 2 increased by 1,000 to 220,000 (Briefing.com consensus 223,000) and continuing jobless claims for the week ending November 25 decreased by 64,000 to 1.861 million.

The key takeaway from the report is that it isn’t producing any major shockwaves as it relates to the labor market. It fits the narrative of the labor market loosening a bit, but not coming undone amid a stream of layoff announcements. Therefore, the market is viewing it through a soft-landing lens.

There was some knee-jerk trading activity in the Treasury market in response to the report that sent yields higher, but they have come back down to lend some support to the equity futures market. The 2-yr note yield, at 4.60% before the release, flirted with 4.64% after the release but is now back to 4.58%. The 10-yr note yield, at 4.15% before the release, skimmed 4.18% after the release but is now back to 4.14%.

Tomorrow will feature the November Employment Situation Report. That could be a “new” news catalyst for the stock market, but for now, it is more of the same chugging to try to get over the hill.

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Originally Posted December 7, 2023 – The stock market thinks it can, but will it?