December 20, 2022

Markets:

Stock futures wavered Tuesday, whipsawing after an announcement from the Bank of Japan as traders fear a year-end rally may not come to fruition.

The Dow on Monday shed more than 162 points, or about 0.5%. The S&P 500 fell 0.9%, and the Nasdaq Composite lost nearly 1.5%. Stocks are on track to end the month and the year in the red, and investors’ hopes for a Santa Claus rally are fading fast.

Fears that the Federal Reserve could tip the economy into a recession plagued investors. Last week, the central bank raised its benchmark interest rate by 50 basis points and policymakers indicated the terminal rate could rise as high as 5.1%.

Other central banks in hawkish mode put further pressure on traders, with the European Central Bank raising rates and its outlook for further hikes last week. Overnight on Tuesday, the Bank of Japan moved to widen its cap on the 10-year Japanese government bond yield, catching traders around the world off guard.

A handful of big companies will report their quarterly results this week ahead of the Christmas holiday. General Mills will report before the bell Tuesday. Nike and FedEx are set to report after the bell.

In economic data, housing starts data for November are due Tuesday morning. This week promises lots of insight into the housing industry. Sales data for existing homes and new homes will be released Wednesday and Friday, respectively.

November’s personal consumption expenditures report, a preferred measure of inflation for the Fed, is due on Friday.

Portfolio:

We enter the new trading session holding positions in AAL and ZIM. Indicators are igniting in premarket based on overnight trading activity in futures. Next line in the sand is 3800 on the S&P. Monster line. Could see a momentum bounce from there but if we break below, 3500 could come super fast. Very interesting considering where we are seasonally with trade patterns. Watching this closely and you better believe this will ignite monster opportunities to start 2023. Remain patient here and let's have a great session.