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Afternoon Note

Failing Rally Attempts

By Willie Walker, Senior Research Analyst
12/21/2018 1:22 PM
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Good News is Bad News

As we mentioned in the morning Hotline Report, good news is bad news.  Today, New York Fed President Williams commented in an interview that the balance sheet runoff is not "inflexible," suggesting the Fed could reevaluate and adjust its view in 2019 if necessary.  This news should have moved the market higher, considering it dropped lower when Fed Chair Powell commented that the central bank was satisfied with the run-off program to reduce its balance sheet, and they had no plans on changing the $50 billion per month run-off. 

Economic indicators

Durable goods rose 0.8% in November, which was considerably better than October’s 4.3% decline, but fell below consensus of 1.7%. Ex-transports, orders declined 0.3%, which was below consensus of +0.03%. 

Key components:

Personal income rose 0.2%, while personal spending increased 0.4%, as consumers continue to spend.

The core PCE deflator, inflation, increased 0.1% month-over-month and 1.9% year over year.  This is a number the Fed looks at to gauge inflation.  The market may wonder why the Fed raised the fed funds rate when the PCE came in below the 2.0% threshold, assuming the Fed knew the number in advance.

University of Michigan Consumer Sentiment came in at 98.3, better than the preliminary reading (97.5) and consensus (97.5). 

S&P 500 Index


Communication Services (XLC)


Consumer Discretionary (XLY)


Consumer Staples (XLP)


Energy (XLE)


Financials (XLF)


Health Care (XLV)


Industrials (XLI)


Transportation Average (IYT)


Technology (XLK)


Utilities (XLU)


Semiconductor (SOX)



Markets are struggling to hold onto any gains during the bounces. Monday, the markets close at 1:00 pm. 

Have a great weekend. 


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