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 WALL STREET NURSES FED HANGOVER, TECH DRAGS THE PARTY DOWN (1605 EST/2105 GMT) The S&P 500 (.SPX) and the Nasdaq (.IXIC) ended the session sharply lower on Thursday, as market leading tech and tech-adjacent megacaps, which outperformed the broader market through much of the global health crisis, dragged the indexes into the red. But buoyant financial stocks helped the keep blue-chip Dow"s (.DJI) loss nominal. Banks in particular had a good day, with the S&P 500 banks index (.SPXBK) gaining 1.6%. On the other hand, the FANG-plus index (.NYFANG), an equal-weighted index that includes 5 core FAANG stocks, and another 5 actively traded technology/growth stocks whose combined value of approximately $10 trillion account for about just under a quarter of total S&P 500 market cap, lost 3.2% on the day. The Philadelphia SE Semiconductor index (.SOX) tumbled 4.3%. Investors decisively preferred value (.IVX), which advanced 0.7%, over growth (.IGX), which shed 2.1%. It marked value"s biggest gain versus growth since early March. None of this should be terribly shocking in the wake of the hawkish turn taken by U.S. Federal Reserve on Wednesday, when it announced at the conclusion of its two-day monetary policy meeting that the central bank would end its asset purchasing program in March and signaled as many as three rate hikes in the coming year in order to battle inflation as the economy returns to normalcy. read more A slew of data released this morning appeared to support the Fed"s view that the economy has nearly completed its return to pre-pandemic health. Low jobless claims, surging housing starts, and manufacturing output hitting a three-year high, with capacity utilization creeping up beyond pre-crisis levels, all seemed to lend some cred to the Fed. read more From here, the upcoming session on Friday appears to offer little in the way of macroeconomic catalysts. At today"s closing levels, all three major stock indexes are on track to show weekly losses, with the S&P 500 and the Nasdaq down the most. Here"s your closing snapshot: (Stephen Culp) ***** ONLY CHASE FED SUGAR HIGH WITH SOME CAUTION (1446 EST/1946 GMT) The strength of stock market"s rally on Wednesday following a hawkish pivot from the Federal Reserve left some investors scratching their heads in confusion. Others like Bespoke Investment Group sounded more cautious than anything. Bespoke calculates the rally marked the 18th time futures traded up to a record intraday level following an FOMC meeting the day before. While most of those instances occurred since the COVID bull market started, there were numerous examples in the late 1990s and during the previous bull market. The positive reaction to the Fed sounds like good news for bulls, but "it warrants some caution going forward," Bespoke said in a research note entitled "Don"t Chase A Sugar High After FOMC." It looked at average returns for the day, week, month, and 3 month period from the close on the day after the Fed"s meeting including all periods in which they say intraday high prices for futures, dating back to 1998. It found the market was down the next day and next week more than half the time. On average, markets are flat a month out and only higher 53% of the time, according to Bespoke, which adds that three months later, the market averages gains of less than 1% though median returns are around 3.2%. This is all to say that "if history is any guide, investors need to be cautious chasing the strong equity performance that came immediately following yesterday"s FOMC meeting." (Sinéad Carew) ***** STUNNING 2021 IPO MARKET A TOUGH ACT TO FOLLOW (1330 EST/1830 GMT) This year"s IPO market was one for the history books, Renaissance Capital says in their annual review. A "stunning" 399 IPOs (including direct listings with a market cap of at least $50 million) raised $143 billion in the busiest year by deal count since 2000 and biggest year for proceeds ever, Renaissance writes. Deal flow was essentially nonstop this year, Renaissance points out, with typical strength in healthcare and technology joined by a pickup in consumer names. However, although IPOs had strong average first-day gains (+31%), Renaissance says, these were "obliterated" in the aftermarket as high valuations ran into rising fears of inflation and COVID-19 variants, resulting in an average IPO return of -10%. Similarly, the Renaissance IPO Index started off strong but lost steam, is negative year-to-date, and significantly underperforming broader markets: Looking ahead to 2022, Renaissance believes the IPO market will fail to match this past year"s pace, but an ample number of candidates are ready to pounce when conditions improve. Renaissance points to notable upcoming new listings from the likes of Hong-Kong-based life insurer FWD Group Holdings (FWD.N), Greek yogurt brand Chobani, as well as social media platform Reddit, which confidentially filed on Wednesday for a potential IPO read more . Meanwhile, heightened activity was not limited to traditional IPOs: Blank check firms posted another record-breaking year as 604 SPACs (special-purpose acquisition companies) raised $144 billion, Renaissance calculates, blowing away 2020"s 248 offerings that raised roughly $80 billion. SPAC mania peaked in the first quarter, which produced about 62% of the entire year"s proceeds, Renaissance says, though broad-based returns suffered amid increased regulatory scrutiny. SPACs continued to serve as a popular alternate route to public markets. Though high investor withdrawals recently before a merger was completed has sent shares of many SPACs, such as media firm BuzzFeed (BZFD.O) and Zoom Video (ZM.O)-backed Cvent (CVT.O), sliding . (Lance Tupper, Chuck Mikolajczak) ***** AS-EXPECTED FED SETS STAGE FOR YEAR-END RALLY (1210 EST/1710 GMT) Nicholas Colas, Co-founder of DataTrek Research, is offering a number of observations regarding Wednesday"s FOMC Meeting results and Chair Powell"s press conference. As Colas sees it, markets breathed a collective sigh of relief that it came out as expected. According to Colas, Fed Funds Futures are suggesting the first rate hike is most likely 3 to 5 months away, and he believes that "is perfectly OK for stocks." This because he says that the first hikes are not historically "rally killers unless there is a 50 basis point move in the mix, and he sees little chance of that happening in 2022. Colas adds that the Fed’s December dot plot of the FOMC’s expected path of 2022 rate policy was exactly what Fed Funds Futures expected. Thus, there was no surprise there. Colas does say there is some concern in the market about a 10-year Treasury yield around 1.46% in terms of what its says about economic growth/Fed policy and the Fed’s ability to raise rates above 1.5%. That said, Colas does think equity markets would be more comfortable if yields were closer to 2.0% over the next year. He also adds that even with a faster taper and three rate hikes next year, the Fed still needs supply chains to open up and consumer spending to normalize back to incremental outlays on services rather than physical goods. Colas does say there were two very bullish messages that came out of Powell"s presser. One is that the Fed does not see the latest pandemic variant as a threat to the U.S. economy. Secondly, Powell sees the current economic setup as much better than in 2018-2019. Colas" takeaway is that "while the Fed has no better crystal ball than markets do, these messages were certainly reassuring. With those in their back pocket, we expect equity markets to rally through year end." (Terence Gabriel) ***** MARCH OF THE DATA SOLDIERS: A PARADE BACK TO ECONOMIC NORMALTOWN (1115 EST/1615 GMT) A platoon of indicators treated investors to a data parade on Thursday, the sum of which indicated that despite ongoing supply constraints, a tight labor market and persistent inflation, the economy is marching back to "normal." The number of U.S. workers filing first-time applications for unemployment benefits (USJOB=ECI) edged up last week to 206,000, a 9.6% increase from the previous week"s upwardly-revised 188,000. read more Analysts expected the Labor Department to deliver an even 200,000. Despite the increase, initial jobless claims remain at the lower edge of the range typically associated with healthy labor market churn, and provides further evidence of a tightening labor market. With quit rates at record highs and business surveys nearly unanimously lamenting the ongoing worker shortage, employers appear disinclined to hand out pink slips. "While seasonal factors have made the data volatile in recent weeks, the trend in jobless claims points to historically low layoff activity and is consistent with a tight labor market," writes Lydia Boussour, lead U.S. economist at Oxford Economics. Ongoing claims (USJOBN=ECI), reported on a one-week lag, notched a steeper than anticipated decline, coming in at 1.845 million. Groundbreaking on new U.S. homes (USHST=ECI) jumped 11.8% last month to 1.679 million units at a seasonally adjusted annualized rate (SAAR), the highest level since March according to the Commerce Department, notching a 7.1% surprise to the upside. read more Having hit a 14-and-a-half year high last March, builders have since contended with scarcity of lots, labor and materials, despite consistently robust demand supporting new construction. Building permits (USBPE=ECI), among the most forward-looking of housing market indicators, also beat expectations, rising 3.6% to 1.712 million units SAAR. Housing starts Housing starts The balance of the economic data released this morning provided separate takes on U.S. business activity, all of which marched in lockstep to suggest continued expansion, but at a slightly slower pace. The key takeaway: demand remains strong, and the supply chain is showing signs of untangling. Output from American goods-makers (USIP=ECI) increased by 0.5% in November, marking a substantial deceleration from the previous month"s 1.7% increase and falling short of the 0.7% projection. But the report from the Federal Reserve also showed capacity utilization (USCAPU=ECI), cranked up 0.3 percentage points to 76.8%, hitting the consensus nail on the head. Capacity use, a measure of economic slack, has now reclaimed its pre-pandemic "normal." "Overall, manufacturing has fully recovered pandemic-related losses on a rebound in non-auto production. Manufacturing activity is still supported by demand for goods and low inventories," says Rubeela Farooqi, chief U.S. economist at High Frequency Economics. "But restrictions arising from rising infections that further aggravate supply chains and shortages are a downside risk." Industrial output Industrial output The deceleration of industrial production last month was echoed by the December reading of The Philadelphia Federal Reserve"s Business index, which showed factory activity in the mid-Atlantic region took its foot off the accelerator this month. The Philly Fed (USPFDB=ECI) delivered a reading of 15.4, falling a mile short of the expected 30 and marking a departure from Tuesday"s Empire State report, which showed an accelerated expansion in New York factory activity this month. A Philly Fed/Empire State number over zero signifies month-over-month expansion. "Looking ahead, manufacturers in the Philly Fed region look poised to maintain positive attitudes in 2022 as solid demand and a heavy backlog of orders keep them working in a high gear," says Oren Klachkin, lead U.S. economist at OE. "However stubborn supply-chain blockages will limit their ability to keep up with demand." Philly Fed Philly Fed Global financial information firm HIS Markit also had its say regarding U.S. business activity. Markit"s advance "flash" purchasing managers" index (PMI) showed a slight, though unexpected slowdown in both the manufacturing (USMPMP=ECI) and services (USMPSP=ECI) sectors. "Business growth slipped only slightly during the month and held up especially well in the vulnerable service sector," writes Chris Williamson, chief business economist at IHS Markit. "Barring the initial price slide seen at the start of the pandemic, December saw the steepest fall in factory input price inflation for nearly a decade," Williamson adds, while noting "a marked easing in the number of supply chain delays." The respective 57.8 and 57.5 PMI readings for manufacturing and services marked modest drops from the previous month. A PMI number over 50 indicates expanded activity versus the prior month. Markit Flash PMI Markit Flash PMI The over-riding "return to economic normalcy" theme, falling neatly behind Wednesday"s hawkish shift from the Fed, appeared to be benefiting economically sensitive stocks. Wall Street"s major indexes are mixed, with tech (.SPLRCT) pulling the Nasdaq (.IXIC) into the red, while financials (.SPSY) and industrials (.SPLRCI) are boosting the DJI (.DJI) into positive territory. (Stephen Culp) ***** WITH A TILT TOWARD VALUE, MAJOR U.S. INDEXES MIXED (1008 EST/1408 GMT) Wall Street"s main indexes are mixed in early trade Thursday after the Federal Reserve announced a faster wind-down of its pandemic-era stimulus, calming nerves around surging price pressures. Of note, there is a clear tilt in favor of more economically sensitive value-oriented (.IVX) S&P 500 (.SPX) sectors versus growth (.IGX). The IVX/IGX ratio has risen to its highest level since mid-November. With this, energy (.SPNY), banks (.SPXBK), and transports (.DJT) are among outperformers. FANGs (.NYFANG), chips (.SOX), and tech (.SPLRCT) are red. Meanwhile, the U.S. 10-Year Treasury yield is falling to the 1.42% area. That said, the 2s-10s yield spread is steady around 79 basis points. Here is where markets stand in early trade: (Terence Gabriel) ***** SMALL CAPS: READY TO DEMAND SOME ATTENTION AGAIN? (0900 EST/1400 GMT) Small caps have certainly been out-of-favor of late. From its November 8 record intraday high to Wednesday"s intraday low the Russell 2000 index (.RUT) collapsed more than 13%. read more It"s been a rough go for small caps vs large caps for most of 2021. For example, despite the RUT"s record highs in November, the RUT/Dow Industrials (.DJI) ratio actually peaked in early-February as it approached its 2014 high: RUT12162021 RUT12162021 The RUT now finds itself trading below both its 50 and 200-day moving averages (DMA), and on Tuesday it hit its lowest level relative to the DJI since November 2020. That said, despite an October scare which saw the 50-DMA skirt the 200-DMA by just decimals, this closely-watched intermediate-term moving average has been above the longer-term moving average since August 2020. There are around 34 points separating them at this time. Additionally, despite the fresh low relative to the DJI, it was just marginal, and with Wednesday"s rally, the ratio ticked up. Thus, just ahead of the time when market participants may look for a "January effect", when small caps tend to outperform large caps, the RUT appears to be at an important juncture. read more If it can hold its summer 2021 lows in the 2,122/2,107 area, (Wednesday"s low was at 2,130.9063), and reclaim its 50-DMA, now around 2,293, there could be room again to challenge its November high, at 2,459, and even the resistance parallel, which now resides just over 2,500. Conversely, continued RUT weakness which takes out its summer lows, leads to a dead-cross (50-DMA crosses below 200-DMA), and sees the RUT/DJI ratio break even lower can suggest potential for a much greater collapse. This, especially, given that the RUT"s rising 200-week moving average, which could be a strong magnet, is now around 1,725. (Terence Gabriel) ***** FOR THURSDAY"S LIVE MARKETS" POSTS PRIOR TO 0900 EST/1400 GMT - CLICK HERE: read more Terence Gabriel and Lance Tupper are Reuters market analysts. The views expressed are their own Our Standards: The Thomson Reuters Trust Principles.