S&P, Nasdaq end at record highs; Dow declines Cons disc leads S&P 500 sector gainers; utilities down most Crude gains; dollar, gold, bitcoin down U.S. 10-Year Treasury yield ~1.59% Nov 18 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com S&P 500, NASDAQ CRAWL TO RECORD CLOSING HIGHS (1603 EST/2103 GMT) In a less than uniformly bullish session on Thursday, the S&P 500 (.SPX) and Nasdaq (.IXIC) eked out record closes with investors taking cues from upbeat retail and technology earnings despite hawkish inflation comments from a Federal Reserve policymaker. Chips were standouts, with the Philadelphia SE Semiconductor index (.SOX) gaining 1.8% and ending at an all-time closing high. That said, the Dow Jones Industrial Average (.DJI), Dow Transports (.DJT), S&P 500 Banks Index (.SPXBK), NYSE FANG+TM index (.NYFANG), and small-cap Russell 2000 (.RUT) all closed lower. More major S&P 500 sectors ended down on the day than up. Breadth also remains an issue. The NYSE and Nasdaq advance/decline (A/D) ratios were a paltry 0.54 and 0.478, given many more issues falling than rising. In fact, the 10-day moving average of the Nasdaq A/D ratio, at 0.877, was its weakest reading, with the Composite ending at a record high, since August 24, 2020. Back then the IXIC topped seven trading days later, and promptly slid as much as 13% into its late September 2020 trough. Here is Thursday"s closing snapshot: Closer11182021 Closer11182021 (Terence Gabriel) ***** POWELL? BRAINARD? THE MARKET ALWAYS WINS (1400 EST/1900 GMT) As President Joe Biden"s announcement on his nominee to head the U.S. Federal Reserve is awaited, CFRA"s Chief Investment Strategist Sam Stovall looked at how the Dow Jones Industrial Average (.DJI) has performed under different Fed chairs. Biden is expected to announce his nominee before Thanksgiving,(November 25), with reappointment expected for current Chair Jerome Powell, though Fed Governor Lael Brainard is also in the running. read more Regardless of Biden"s eventual pick, there"s historical encouragement for investors hoping for a continued bull market next year, Stovall says. The Dow has posted a nearly 4% median gain over a new Fed Chair"s first six months in office, rising two-thirds of the time. U.S. Stocks under Jerome Powell"s Fed tenure U.S. Stocks under Jerome Powell"s Fed tenure Over Powell"s nearly four years in the role, the Dow recorded an impressive 11% compound annual growth rate (CAGR), according to Stovall, higher than the median 8.5% CAGR under all past Fed chairs. However, Daniel Crissinger, Chair from 1923 - 1927, presided over a whopping 17.5% CAGR rise for the Dow. Paul Volcker"s tenure (1979-1987) saw gains of 15.4%. Only one Fed chair"s tenure saw the market decline -- the Dow tumbled nearly 33% during Eugene Meyer"s term. In his defense, that was during the Great Depression. Coming back to the present, BCA Research says Brainard"s appointment is unlikely to spook markets given her assumed more dovish position. "(Brainard) would introduce some new uncertainty ... encourage near-term inflation concerns and push market sentiment toward the view that the Fed will be behind the curve, yet investors would probably also believe that a hawkish mistake would be less likely in 2022-24," BCA says. Barings Investment Institute"s Christopher Smart recommends watching bank stocks after the nomination annoucement, as "the real difference lies in Powell’s lighter touch on bank regulation and Brainard’s strong dissents as post-crisis restrictions have been lifted." (Lisa Mattackal) ***** UBS 2022 outlook: A year of two halves (1335 EST/1835 GMT) For 2022, the global wealth management side of UBS expects some revelation of "what a new "normal" looks like, after two years marked by lockdown and reopening." Simply speaking, the UBS Global Wealth Management’s Chief Investment Office Year Ahead 2022 outlook, headed by Mark Haefele, chief investment officer at UBS Global Wealth Management, is forecasting high rates of economic growth and inflation in the first half the year with lower growth and inflation in the second half. And its recommendation are to buy winners of global growth which it lists as cyclicals including eurozone and Japanese equities, U.S. midcaps, global financials and commodities and energy stocks. But it notes that slower growth in the second half could start to favor more defensive sectors such as healthcare. It also suggests seeking unconventional yields in the form of US senior loans, synthetic credit, private credit, and dividend-paying stocks. Also with the Fed tapering its support, a stronger U.S. dollar is in the cards, relative to currencies reflecting looser monetary policies, such as the euro, yen, and Swiss franc. Haefele offers three different targets for various asset classes a central target, an upside scenario and a downside scenario. Its central scenario forecast is for the S&P 500 to be at 5,000 in June, which would be a 6.7% gain from Wednesday"s close of 4,688.67 and for the euro to be at $1.12 vs Wednesday"s close of $1.1319. This would assume US inflation stays elevated in early 2022 before gradually falling towards 2% by mid-2022 with major central banks reducing accommodation gradually and the Fed finishing tapering by mid-2022. It also assumes the economic reopening keeps a gradual pace through 2022 with the current COVID-19 wave not escalating enough to require new lockdowns. It also would mean Chinese growth stabilizes and COVID-19-related restrictions there start to be lifted in 2Q and that the United States takes a "multilateral and predictable approach to trade policy." The UBS upside scenario has the S&P hitting 5,200 in June, a 10.9% gain, and the downside scenario is 4,000, a 14.7% drop. The upside assumes things like abating inflation fears or elevated inflation with growth staying well above long-term trend, higher than expected fiscal spending, a Covid fade to the extent that restrictions are lifted faster than expected, faster restriction lift in China and an ease in its regulatory crackdown as well as a partial rollback of existing trade tariffs, which would boost global growth. The downside scenario UBS paints is bleak and includes issues such as rising inflation, including persistently high energy prices, with sharper than expected growth deceleration, more aggressive Fed tightening, diminishing fiscal spending and consumption that does not fully recover due to bleak Covid scenarios that cause more fear and restrictions. It also includes greater than expected china restrictions and a broader based property market crisis there along with further regulatory tightening. In geopolitics, possible downsides it sight are renewed US-China tensions over trade and/or Taiwan. (Sinéad Carew) ***** CHIP INDEX HITS RECORD AS NVIDIA EYES $1 TRILLION CLUB (1230 EST/1730 GMT) Wall Street"s semiconductor index is surging to record highs on Thursday, lifted by a rally in Nvidia after the graphics chipmaker"s quarterly report beat lofty expectations and fueled enthusiasm about its opportunity to become a major player in the so-called metaverse. Nvidia (NVDA.O) is jumping nearly 10% to $319 and is on track to close at its highest level ever after it forecast revenue above analysts" estimates. The Silicon Valley company is betting on rapid growth in its data center business as more internet companies invest in artificial intelligence and virtual reality platforms. Nvidia"s rally is helping to drive the Philadelphia Semiconductor index (.SOX) up 1.8%, putting it on track to close at its highest level ever. The chip index is now up 39% in 2021, far outpacing the S&P 500"s (.SPX) 25% gain. Nvidia"s market capitalization topped $800 billion, with the stock now up almost 150% year to date. In a research note entitled, "The First Trillion Dollar Semiconductor Company," Needham & Company analyst Rajvindra Gill raised his price target for Nvidia to $400 from $245. Also buoying the chip index, Advanced Micro Devices (AMD.O), which also stands to gain from the metaverse, is jumping 3%. (Noel Randewich) ***** EUROPE: A DIP! WE HAVE A DIP! (1206 EST/1706 GMT) A late risk-off move in afternoon trading has sent the pan-European STOXX 600 to close in negative territory, which has only happened once so far this November. Yields in government bond dropped, with the bund going down close to 4 basis points to -0.280%, leaving just a few rate sensitive sectors to rejoice, like real estate stocks, up 0.6%. It was definitely not a day for the reflation trade with banks down 1%, mining losing 1.6% and oil and gas retreating 1.8%. All in all, the STOXX 600 lost 0.5% which, in the grand scheme of things, leaves it only three little points from yesterday"s 490.58 points all-time high. Paris" CAC 40 and Frankfurt"s DAX both ended about 0.2% lower but are still obviously within striking distance of the historic peaks touched earlier in the session. With most of the upbeat Q3 earnings season now behind us and European stocks hitting records every other day, some investors may have felt reluctant to further long the STOXX 600. There are still, however, many analysts for whom there"s still some upside left. Mark Haefele, CIO at UBS GWM, wrote in his daily note this morning that given that policy remains supportive, full lockdowns unlikely and the earnings recovery on track, further gains are possible moving forward. "Eurozone equities remain one of our most preferred regions", he said, adding that with low or negative government bond yields in the region, MSCI EMU valuations could raise from 16 times 12-month forward earnings to 17. df df (Julien Ponthus) ***** CREDIT CONDITIONS STILL FAVORABLE FOR STOCKS (1127 EST/1627 GMT) Jack Ablin, chief investment officer and founding partner at Cresset, is out a note discussing credit conditions, and what he thinks they mean for stocks at this time. Ablin says credit conditions are a valuable barometer for managing market risk. In this regard, he says you want to stay invested when credit conditions are favorable and cut back on risk when credit conditions turn negative. He says that the yield premium lenders require to extend credit to lower-quality borrowers is an important means to gauge credit conditions. A low yield premium implies favorable credit conditions, while a sudden rise in this measure suggests lenders anticipate trouble and require higher compensation. Cresset’s credit conditions model defines “favorable conditions” as when the yield premium, or spread, is trading below 90% of its 200-day moving average and “negative conditions” as when the spread is trading more than 110% above this long-term moving average. According to Ablin, since 1998, holding the S&P 500 during favorable credit conditions and shifting to cash when credit conditions turn negative would have bettered the S&P 500 by over 130 percentage points. He adds that, right now, Cresset"s credit condition metrics are saying to "hold the S&P." "We will continue to monitor credit conditions, on the lookout for our next opportunity to reduce equity market risk and declare victory on this bull market." (Terence Gabriel) ***** THURSDAY DATA: "MEH" IS THE WORD (1104 EST/1604 GMT) Relatively unexciting data arrived on Thursday in triplicate, singing a song market participants by now have learned by heart: while the economy is improving, its progress is being hampered by labor and materials shortages. The number of U.S. workers filing first-time applications for unemployment benefits (USJOB=ECI) barely budged last week according to the Labor Department. Initial claims came in at 268,000, higher than consensus, shaving a mere thousand from the previous week"s upwardly revised number. read more Still, they reached the lowest level since the onset of the COVID crisis. The trend remains downward, hovering at the top end of the range associated with healthy labor market churn and drawing ever-closer to pre-pandemic levels. But to what extent can we thank the worker drought for the downward trend? "Layoffs are falling, reflective of companies holding on to workers amid a labor shortage," writes Rubeela Farooqi, chief U.S. economist at High Frequency Economics. "We expect supply to come back online, as the cushion from savings diminishes, and assuming the threat from the virus continues to recede over coming months." Ongoing claims (USJOBN=ECI), reported on a one-week lag, posted a bigger-than-expected drop, falling to 2.08 million. For context, the number of Americans collecting unemployment insurance benefits for two weeks or more could populate the city of Austin, Texas twice over. Jobless claims Jobless claims Separately, it"s official: east coast factories have shifted into overdrive this month. The Philadelphia Federal Reserve"s Business index (aka Philly Fed) (USPFDB=ECI) delivered a print of 39, 15 points above economist forecasts and a solid acceleration from October"s 23.8. The report nicely echoed the Empire State index"s similar surge on Monday. Philly Fed/Empire State numbers above zero signify increased activity over the previous month. Broken down by components, the good news is that new orders went to the races and the six-month outlook improved. Less cheery is the downtick in the employment and capex indexes and the continued upward climb of the prices paid segment, further evidence that the ongoing supply drought of workers and materials are significant headwinds for manufacturing. "These numbers all suggest that supply chain pressures remain intense, but we expect to see a clear improvement over the next few months as chip supply rises and port logjams ease," says Ian Shepherdson, chief economist with Pantheon Macroeconomics.or Philly Fed Philly Fed Finally, the Conference Board (CB) had its say, releasing its latest Leading Indicators data (USLEAD=ECI). The index posted an October gain of 0.9%, a hair better than analysts expected and a solid improvement over the 0.1% September reading, and suggests "the current economic expansion will continue into 2022 and may even gain some momentum in the final months of this year,” according to Ataman Ozyildirim, CB"s senior director of Economic Research. "However, rising prices and supply chain bottlenecks pose challenges to growth and are not expected to dissipate until well into 2022," Ozyildirim says. He goes on to add that "gains were widespread among the leading indicators, with only the average workweek and consumers’ outlook making negative contributions." Consumer expectations are indeed more sour than leading indicators and recent consumer spending data might seem to suggest. The graphic below shows the leading indicator index compared with the "expectations" component of CB"s own Consumer Confidence data: Leading indicators Leading indicators CB"s leading indicator index is an amalgamation of ten economic data points, including jobless claims, stock prices, yield spreads, building permits and others. Wall Street appeared to be unimpressed by Thursday"s economic data however, with the three major indexes starting mixed but all trending red as the morning wore on. Economically sensitive smallcaps (.RUT) and transports (.DJT) were underperforming. (Stephen Culp) ***** S&P 500 BACK UP TO BATTLE ITS HIGHS (0951 EST/1451 GMT) The S&P 500 (.SPX) is slightly higher in early trade Thursday, putting it back up to battle its 4,701.70 November 8 record close. This after chipmaker Nvidia (NVDA.O) rallied on robust third-quarter results, while a fresh batch of positive retail earnings indicated strength in consumer spending against the backdrop of rising inflation. With its early rise, NVDA is providing the biggest boost to the benchmark index, and with a more than 2% gain, the Philadelphia SE Semiconductor index (.SOX) has jumped to a new record high. That said, the major averages are mixed, banks (.SPXBK) and transports (.DJT) are red, and more major S&P 500 sectors are down than up. The NYSE FANG+TM index (.NYFANG), which also counts Nvidia as a member, is up just modestly. Here is where markets stand in early trade: Earlytrade11182021 Earlytrade11182021 (Terence Gabriel) ***** MIGHT THIS JUNKY ACTION MESS UP THE S&P 500"s RISE? (0900 EST/1400 GMT) The S&P 500 (.SPX) ended Wednesday only about 0.3% below its record close just set on November 8. With roughly a month and a half of trading left to go in 2021, the SPX has already seen 65 record closing highs so far this year, which is the second most ever for a full year. The most ever was 77 in 1995. However, recent action in the SPDR Bloomberg Barclays High Yield Bond ETF (JNK.P), as a proxy for the high-yield sector, may be warning that the new highs party may draw to close, as action in the riskiest of corporate bonds, can potentially provide an important signal for the equity market. Although timing can be blunt, struggling high-yield price action can be a sign of less than buoyant sentiment, ultimately leading to equity market instability: SPXJNK11182021 SPXJNK11182021 JNK is not in gear with stocks in terms of its trend. On Wednesday, on a weekly basis, the ETF ended at an eight-month low even though the SPX is flirting with its recent record highs. Just since early 2020, in the wake of new record highs in stocks, S&P 500 tops of varying degree came in the wake of even minor weekly JNK divergence. Additionally, JNK is on pace to end below its 40-week moving average (WMA) for the sixth time out of the past seven weeks. The SPX has not closed below its 40-WMA since late-June 2020. Therefore, it may be important for the JNK to quickly reverse to the upside in order to keep pace with, and confirm, any S&P 500 on-going push to new highs. (Terence Gabriel)