U.S. stocks bounced around the unchanged line on Wednesday in light holiday trading. The Dow Jones Industrial Average gained 0.1%, the S&P 500 gained 0.1%, the Nasdaq Composite gained a fraction and the Russell 2000 lost a fraction. Treasury bonds strengthened, the dollar fell, gold gained 0.3% and crude oil dropped 0.6%.
Defensive utilities and real estate investment trusts led the way with gains of 0.4%, while energy was the laggard, down 0.3%. Tesla Inc (NASDAQ:TSLA) fell 1.8% after Key Bank analysts lowered their price target on lower estimated Model 3 deliveries.
Retail stocks took a slide on post-holiday profit-taking. Remember, the sector also got a pre-holiday lift on tax cut hopes, as they are among the most heavily taxed corporate sectors. Macy’s Inc (NYSE:M) fell 4.5% while Kohl’s Corporation (NYSE:KSS) lost 2.8%. This came amid ongoing fears that Amazon.com, Inc. (NASDAQ:AMZN) will continue to pressure same-store sales and customer traffic.
And on the economic front, Consumer Confidence came in at 122.1, slightly below estimates of a 128.1 reading. November was revised lower, but remained at a 17-year high. There was some cooling of optimism surrounding the job market.
Below the cheerful surface, the evidence continues to grow that a long-delayed correction could come as the calendar flips to January, the holiday bills come due and the 2017 focus on President Trump’s tax reform flips to a look ahead to the 2018 mid-terms, the likely acceleration in inflation, higher interest rates and further rate hikes from the Federal Reserve.
Bullishness is off-the-charts extreme, with the chart above showing a variety of metrics very near all-time highs.
Cracks are appearing in the veneer of invincibility. The CBOE Volatility Index climbed back above its 50-day moving average today. Large-cap tech stocks fell for the sixth day in a row, the worst losing streak since November 2016. Bank stocks are under pressure. And yes, even Bitcoin is weakening again.
Today’s Trading Landscape:
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
Anthony Mirhaydari is the founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.