Back On Track… It was beginning to look like a “here we go again” type of Tuesday, with equities again opening the day green and then beginning to fade, but US indices are now seemingly determined to snap the S&P’s 4-day losing streak (only the 2nd this year) as they push higher into the afternoon. As NYC battens down the hatches for an impending snowstorm, the bulls are charging ahead once again thanks to (what else?) progress on stimulus talks. To be fair, a deal does seem to be getting closer as the two-part deal garners wider support and Senate and House leaders are set to discuss at a 4pm meeting later today (need to save some optimism for another green day tomorrow). The one-track stim focus has brushed aside any concern around a lighter than anticipated Empire Manufacturing print (Nov Industrial Prod’n data was inline) and allowed rising virus cases and the threat of stricter lockdowns to continue to be treated as old news. “Technology” is leading the way among S&P sectors, but looks can be deceiving. NYFANG index is trading up +1.2%, but 8/10 names trade lower: the space is standing on the weighty shoulders of Apple (AAPL +4.2%) which announced plans to increase iPhone production and in lesser part due to Baidu (BIDU +10%) roaring higher on a report it will make its own EVs. Otherwise FB, AMZN, and GOOGL all sit in the red after the EU announced tougher anti-trust regulation on the tech giants (what else is new?) leaving Media and Software as underperformers (*update* of course GOOGL and AMZN pushed into the green in the last 45 mins). Value is putting in a decent showing, with gambling names carrying Hotel/Leisure, and Energy is following Crude’s recovery from early losses despite as less than rosy demand outlook from OPEC+.

Dickensian Distortion –Russell 2000 new all-time highs. Dow new all-time highs. Granted US stocks have pared gains since this morning, but it doesn’t seem as though investors are ready to part ways with 2020 markets just yet. Between the spending bill inching ever closer and the potential for vaccine success, there is still much to be done before funds close their books on 2020. Not to mention, the Fed, BoE and BoJ later this week. Further, the Nasdaq didn’t even blink at a report that tech giants could face fines by the EU of up to 10% of their revenues, and deal mania continues to bring the action. Today’s top: AstraZeneca (-5%) agreed to buy Boston based Alexion Pharma (+30%) for a cool $39bill. Also, Pluralsight rose 6% after private-equity firm Vista Equity Partners agreed to buy the educational-software maker. The semis are leading thanks to Marvel (+3.5%) after brokers raised their targets and the stock was added to the Nasdaq 100. The sector lagging is Energy, thanks to Oil, which slipped into negative territory after OPEC cut its demand forecast, but has just recovered to + 30bps in to the green. SandRidge (SD +21.5%) is the big name of note — 20% higher after announcing the sale of its assets in Colorado to an unnamed buyer for $47m. NBD.

Christmas Cranks – Markets have the vaccine, now it just needs some stimulus to get us through the winter.  The back and forth between parties in Washington continues, and that means no movement, not helping stocks for direction.  The major indexes are all trading in the red, just off their day’s low.  The last leg lower after stimulus comments that the two parties are still far apart.  As of now, the S&P and Nasdaq are about to finish with their first weekly loss since mid-November (have gained 2.5% and 4% since then though).  Despite the red backdrop, Consumer Staples (XLP +15bps) and Communication (XLC +26bps) are higher.  The latter group benefitting from the positive Disney (+14%) direct-to-consumer stats last night.  Leading on the downside are Energy (XOP -2.7%) and Metals (-2.3%), although they still are atop the 5 day winners. 

The Air Up There – Absurd. Insane. Flabbergasting. These are just some of the descriptors we’re hearing both internally and externally during a week that we may be looking back on in hindsight. You’d think DoorDash cured cancer rather than delivers food (amongst a crowded field I might add) and Airbnb came up with an antidote to stop aging instead of it’s actual purpose. Christmas isn’t just for kids and that’s never been more apparent as market pros and amateurs alike gobble up the latest shiny toy. Even the latest minted billionaire, ABNB CEO, could barely hold back his astonishment when he heard the first indication. This isn’t frothy – that’s a latte. This is an exploding dishwasher. It doesn’t’ hurt that these companies are releasing a pittance of their equity; FOMO is going next level. It’s the retail investor at home with spare cash driving the price via low and zero trading commission platforms like Fidelity and Robin Hood. Don’t believe me? See below – that’s a pretty sweet Buy/Sell ratio. It looks like the market has practically turned its back on Tesla by comparison. (it hasn’t) Our Airbnb guru loves the company but even at these lofty levels would have a look at Booking/Expedia as they now look cheap. And if the pricing is right, Marriott and Hilton are shorts.

Cold Water Thrown… Futures were boosted this morning by that familiar, warm feeling of “stimulus hopes”, but some less than encouraging signaling from Congress has US indices sliding lower into the afternoon. You’d think we’d have learned not to put too much faith in assertions of “progress” in negotiations (given we heard a lot of the same even back when Trump still had the incentive of an election to get a deal done) but with so many indices notching ATHs based on the negotiations, you have to take the bad with the good. And for the most part, things are still looking UP for stocks: today’s IPO menu (more below) shows investors’ appetite for risk is far from satiated. Tech is leading the way lower as the session is clinging to its Rotation-ary tilt despite the building sogginess (NDX snapping a 10-day win streak). Autos are leading, along with Telcos getting a boost from AT&T (T +1.8%) reportedly get a bid for DirecTV valuing it at over $15bn. Energy was hanging tough, but has faded as Crude falls back into the red after earlier shrugging off a larger than expected build in US stockpiles.

Jolly Old St Nicholas –  lean your ear this way because Christmas Eve is coming and it wouldn’t be Christmas without a proper Santa Rally.Early this morning, it didn’t seem like this would be the week for any sorta rally. But, Turnaround Tuesday (and Santa) find a way. Stocks are back on the ascent track, gearing towards another record (S&P above 3700 as we speak) thanks to the very two things that sent markets lower in the first place.

Like An Old Shoe – When things seem to be a bit unclear for this market, it dances with who brought it. And that means a default to the growth and technology names as investors grapple with the short-term economic, physical and mental pain wrought by COVID vs promises for a new and better day down the road. The market has done a remarkable job of compartmentalizing but the escalating headlines over increased cases, hospitalizations, deaths and lockdowns is enough to temporarily at least shove the value/cyclical trade back in its box. Why would you blame them either, when even a hint of growth/tech is like strapping a rocket booster to a stocks back. Luminar the case in point, up another 16% today. Homebuilders are on the move higher as well, but that seems more a case of mean reversion after an ugly week, ITB.US losing nearly 4%. Energy would be the biggest profit-taking target after a strong last week and absurd past month and restaurants and hotels also moving lower as California goes into nearly complete lockdown and states on the east coast feel to be on the precipice of the same. But there always seems to be a catalyst set to overcome any obstacles in the market’s way. A massive stash cash, largely by households, could be just that thing as the FDA looks to approve the Pfizer vaccine later in the week.

End On a High Note… We’ve seen some recent examples of just how jumpy investors are at these lofty heights (i.e. yesterday’s Pfizer scare / the 10-year yield’s quick bounce off .90% post-NFPs this morning) but in general the arrow continues to point higher for the market. Therefore it’s no surprise stocks are well in the green this afternoon as they put on display their ability to shrug off pretty much anything, including weaker than forecasted NFPs this morning. Ongoing stimulus talks of course make that shrugging even easier, and the “hope” springing from continued dialogue between Democrats and Republicans is helping to drum up the session’s risk-on tone. Value is back on top with Energy (crude still riding high off the OPEC+ agreement), Autos, and Banks all outperforming, but Semis are also crashing the party with several constituents (MU +5.8%, QCOM +4.5%) continuing their daily appearance son the 12-month relative high list. Utilities and Household good are lower as defensives underperform, while the USD has managed to slow its slide for today at least.

Struggle for the Spotlight… The struggle for the spotlight between stimulus and vaccine “hopes” continues as headlines on both fronts came into play in the last 2 hours of the day. US indices regathered steam after 2pm as investors digested more Republicans throwing their support behind the $908bn bipartisan bill, getting an extra boost on word that Trump ally Lindsay Graham backed the compromise and had discussed it with the President (quote below).

Buy While You Wait?… US equities once again feel like they’re waiting for more catalysts to restart the rally party, but in the meantime why not grind out some more ATHs? A green finish is no sure thing however, as the S&P just blipped into negative territory momentarily with 2 hours left in the trading day. Stimulus talks continue to reassert themselves as the apple of investors’ eyes as vaccine excitement wears off, but that doesn’t mean much progress is being made. The latest back and forth today saw Senate leader McConnell say a deal is “within reach” but excitement has waned in the last hour or so as the two sides remain apart on key issues after a phone call between Pelosi and McConnell this afternoon. The mood this morning was boosted by more comforting eco data, with lighter than expected jobless claims providing a nice appetizer for NFPs tomorrow and Markit Services PMIs and ISM Services data both healthily in expansion territory. The Nasdaq is outperforming the S&P thanks to a few high flying software earnings (CRWD +14%, ZS +23%) but SPX has more of a Value tilt with Energy applauding OPEC+ reaching a deal to taper supply increases gently. Solid results from PVH (+8.7%) are leading Apparel names higher, while the cruisers (CCL +10%, NCLH +10%, RCL +5%) tow Hotel/Leisure higher following broker upgrades (we also hosted Carnival CEO yesterday, ask for more!). Hard to complain about a lack of action considering where stocks currently stand… especially when US daily COVID hospitalizations and death both marked their own records yesterday…