Something spooked the equities market yesterday midway through the session, and don’t look now, but bond yields are edging higher. The 30-year bond yield has picked up a real head of steam.  

The Ten-year yield is back above 4.0% and could rally to 4.2% shortly.

 Ten out of eleven sectors were lower when the dust settled for stocks.

Market breadth was ugly, particularly on the New York Stock Exchange (NYSE), where the down volume outpaced the up volume by almost seven times.

Market Breadth	NYSE	NASDAQ
Advancers	648	1,183
Decliners	2,207	3,133
New Highs	56	87
New Lows	68	207
Up Volume	580.65 million	3.06 billion
Down Volume	3.62 billion	3.35 billion

The Heat Map was overwhelmingly red.

According to the latest Bank of America Survey of Global Fund Managers, there is enormous confidence that it's easy sailing from here.

Not only have the experts gotten overzealous on the market, but the most crowded trade is the “Long Magnificent Seven.”

Optimism over Federal Reserve interest rate cuts has spurred investors to up their exposure to US stocks to the highest level in more than two years, according to Bank of America Corp.’s latest fund manager survey.

There is “record optimism on rate cuts” and 79% of survey respondents expect the global economy to experience either a soft or no landing in 2024, BofA’s team led by Michael Hartnett wrote in a note. Most respondents see stocks as the best way to play the Fed rate cutting cycle, the analysts said.

American Consumers & Heavy lifting

There is a lot of debate on the strength of U.S. households. One camp sees a lot of red flags, and the other finds ways to mitigate the perceived severity of said data. For instance, there is now a record number of multiple jobholders in the U.S.

The nonplussed camp says the way to look at this state is multiple jobholders as a percentage of employed. The problem with trying to ignore this data using this approach is that the trend has clearly been violated, and this issue worsens before it gets better.

We will know more about the strength of the consumer this morning when Retail Sales for December 2023 are released.

Don’t miss my live town hall special, “Unbreakable Investor,” on January 18, 2024.

Portfolio Approach

We added a new Technology position yesterday and closed a Health Care position this morning in the Hotline model portfolio.

Today’s Session

Initial retail sale sales for December climbed +0.6% from November while the Street consensus was for an increase of 0.4%.

• Excluding autos +0.4; consensus +0.2%
• Excluding gas and autos +0.6%; consensus +0.3%

The biggest shocker is department store sales which climbed 3.0% while internet sales edged up 1.5%.

The 10-year yield spiked to its highest level this year following the retail sales data.

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