An interesting rally today, even after the LEI came in for a third consecutive month with at least a 1.0% fall, now down an annualized 8.2% over the last six months and firmly in recession territory. Market seems to think bad news is still good news.

“There was widespread weakness among leading indicators in December, indicating deteriorating conditions for labor markets, manufacturing, housing construction, and financial markets in the months ahead. Meanwhile, the coincident economic index (CEI) has not weakened in the same fashion as the LEI because labor market related indicators (employment and personal income) remain robust. Nonetheless, industrial production— also a component of the CEI—fell for the third straight month. Overall economic activity is likely to turn negative in the coming quarters before picking up again in the final quarter of 2023.”

Semiconductor stocks posting big gains with some help from analyst upgrades. The PHLX Semiconductor index is up 4.7%.

Market breadth strong this afternoon with advances leading decliners by a nearly 4-to-1 margin at the NYSE and 2-to-1 margin at the Nasdaq.

Today’s move has pushed the S&P 500 past it 4,000 level and above its 200-day moving average.