Monday Morning Musings

Markets are higher in early trading despite some lackluster action overseas.  There has been no economic data to report today, and little corporate news.  Sysco (SYY) is up over 15% at the start after agreeing to acquire US Foods for $8.2 billion.

The Nasdaq is hitting new highs while the S&P 500 is close, about 4 points away as of now.

Bond yields are easing back a bit with the 10-year yield trading at 2.84%.  Interest-rate sensitive stocks are lagging again, with utilities down the most of any sector today, and REITs and MLPs lagging.

Oil prices are steady near $97.57 while natural gas prices are hitting a 6-month high amid surging demand from all the cold and snow storms along the east.  It's been pretty cold out west too.  I had my heat on all weekend.  Gold prices are up a little to $1236.

Asian markets were mostly higher overnight.  China's trade surplus widened after exports grew more than expected (+12.7%).  Japan was higher also despite its final read of Q3 GDP being revised lower to 0.3%.

Europe's markets are mixed after Germany's industrial production fell 1.2% last month, below expectations.  Also, Eurozone investor confidence ticked lower to 8.0 from 9.3.

The volatility index is a little higher today hovering around the 14 level.  Last week it topped the 15 level, something we forecast after its most recent trip down to the 12 floor. We think that 12-15 trading range is likely to remain in place into year-end, but after that we are probably overdue for a spike above the 15 level on the next correction in the market.

Trading comment: The recent pullback in the market was once again more of a wiggle than anything else.  The finish line for the year is firmly in sight for most portfolio managers, so window dressing is likely setting in where investors are selling their losing positions and adding to their winners.  I think we have been seeing a lot of tax loss selling also, where the weakest stocks and sectors have continued to be sold despite looking like they are good values at current levels.  We have seen selling in REITs and preferreds in particular, which should make for a very good 'January effect' bounce next year after the selling has run its course.