Monday Morning Musings

Markets are trading higher in early trading after last week's pullback.  The S&P 500 traded down -1.8% over the last 4 sessions so its not surprising to see this bounce taking shape this morning. 

Markets were also bolstered by some solid economic data.  November industrial production rose 1.1%, above expectations.  Also, Q3 productivity was revised higher to 3.0% from 2.7% and unit labor costs were revised lower to -1.4% from -0.6%.  The Empire Manuf. Survey also increased last month.  Those are all positive datapoints. 

Interestingly the positive economic data isn't pushing bond yields higher today.  So far the 10-year yield is flat near 2.85%.

Asian markets were lower overnight.  China's HSBC Manuf. PMI slipped to 50.5 from 50.8.  Japan's Tankan index improved.

Europe's markets are higher this morning.  Eurozone manuf PMI improved to 52.7 from 51.6 while the services PMI slipped to 51.0 from 51.2.

Commodities are also higher with oil prices up a bit to $97.30 and gold prices firmer near $1241.

The volatility index got above the 15 level during last week's pullback in the stock market, and today is still hovering in the 15.60 range.  Our guess is that those folks looking for the fabled 'Santa Claus' rally might look to a move by the VIX back below the 15 level as the green light for the next rally.

Trading comment: Stocks have consolidated nicely and the market has worked off its recent overbought condition.  That doesn't mean you have to jump in and do all your buying on Day 1 (today), but we do think that stocks could enjoy another push higher into year end.  There has also been a lot of tax loss selling in losing areas like REITs and preferreds, and pretty soon those could be good candidates to add to as they should enjoy nice January effect bounces when the tax-related selling subsides.