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Stocks are moving in a very narrow range (less than 50 points on the Dow, well below the daily average swing of about 125 points), partly because bond yields are also moving in a very narrow range.
But watch the trend: There are still move stocks advancing than declining, and we once again we have closed at a historic high on the S&P 500.
So what, you say? You say it doesn't take much to close at a historic high? Friend, two weeks ago everyone was bemoaning we seemed stuck at 1,800. Now we are at 1,808 and traders are moaning, "Bob, this is really boring."
Really? I think it's amazing. I think it's amazing that the market may go sideways for a few days, but it doesn't go down.
The NASDAQ is at a 13-year high. Techs, financials, Industrials--all cyclicals--are market leaders.
As one trader pointed out to me: The markets are assimilating Friday's power move higher. Now that we have closed at a new historic high on the S&P, technicians will likely get even more bullish.
One sector that worries me: Energy, particularly Exploration & Production (E&P) stocks. The XOP peaked out in October and is now down 10 percent, while the market is near new highs.
It's a simple story: There is too much oil and gas and not enough demand. And the U.S. has now become a major energy exporter, thanks to the explosion of the shale business.
Even a cold snap, a big storm and a jump in natural gas prices aren't enough to bring the stocks up today.
Paul Sankey at Deutsche Bank has written extensively about the problem: Saudi Arabia is continuing to export oil into an over-supplied U.S. market. At the same time, the U.S. is exporting large amounts of oil, but if there continues to be large excess global refining capacity (and lower demand) that is going to choke off export growth.
Combine that with weaker U.S. demand, and you have a problem for the E&P group.
The hope, as Sankey has pointed out, is that European refiners will cut back on production. Maybe.
There is a second problem: There is no growth in U.S. refining capacity for the next five years, but oil production is growing rapidly. So the U.S. is becoming increasingly oversupplied. Will this result in less drilling? It certainly will if prices continue to drop. How much will it need to drop? West Texas crude is currently at about $97; Sankey thinks $75 a barrel is where supply will start to be constrained.
—By CNBC's Bob Pisani
What's the theme for 2014?
It's still murky, but I'm increasingly warming to the idea of a synchronized--yet very low-key--global economic recovery.
Consider the international developments:
I don't care what anyone tells you--while plenty were expecting a Nonfarm Payroll report over 200,000, but almost no one predicted the markets would react this way.
All week the market has struggled as generally positive economic news has been met with taper fears, with lower prices and higher bond yields.
Now, all of a sudden we get the Mother of All Good News and stocks stage a rally, with little or no reaction in the bond market?
The market today is saying: Don't sell on tapering. Huh?
Does this mean that tapering is less of an issue?
This is the crucial question for the market right now. Taper is the biggest negative the bears have been pointing to.
Are "taper worries" a 2013 issue and not the 2014 issue that we all expected?
That's a problem for active traders, because many aren't positioned for this. Many are positioned for tapering to be a headwind.
Is this theory wrong? Does it prove the stock market might be strong enough to handle a taper with minimal damage? Alan Ruskin at Deutsche Bank voiced this opinion this morning and said the positive market reaction increased the chances the Federal Reserve might begin tapering in December.
I'm not so sure. Remember, this happened last month...we got a better-than-expected jobs report, and the market rallied. It proved to be something of a head-fake for the market. It rallied, but for a few days, and then stalled out.
Second, the bond market HAS responded to better economic news. Bond yields have been running up since late October, moving from roughly 2.50 percent to 2.87 percent. So the bond market has already priced in some moves. I've even heard some try to argue that at current levels one can make the case they are positioned for a January taper to start.
If that's the case, that is a pretty mild reaction.
There are two issues: The timing and aggressiveness of the Fed taper, and how Janet Yellen will cut the Gordian Knot linking tapering to tightening.
First, a lot of traders are arguing that two months of job growth over 200,000 is still not enough to convincingly start rolling back bond buying and that the Fed will still not likely begin paring back before March. That's the position of Jan Hatzius at Goldman Sachs and Michael Gapen at Barclays.
Others, including Drew Matus at UBS, anticipate taper will begin in January.
But perhaps a more important issue to settle is not WHEN the Fed will begin tapering, but how aggressive it will be once tapering begins.
Some believe that while a 200,000 figure is strong, it's not too strong, and that when the Fed begins tapering, it will be a very gentle process. That's the position of Steven Englander at Citi.
Second, there is a growing belief that Janet Yellen will attempt to enforce the concept "tapering is not tightening" by doing something dramatic, like changing the 6.5 percent unemployment threshold the Fed has previously indicated would be the point they would begin increasing interest rates.
Cheers! Today is the 80th anniversary of the repeal of Prohibition. The Twenty-First Amendment to the Constitution was ratified on December 5, 1933. It repealed the Eighteenth Amendment establishing Prohibition, which went into effect on January 17, 1920.
It's the only Amendment that repealed a prior Amendment. It's also the only amendment to be ratified using the state ratifying convention. All other Amendments have been ratified by state legislatures.
The first state to ratify was Michigan on April 10, 1933. On December 5, 1933, Utah became the 36th statet o ratify (Ohio and Pennsylvania had ratified on the same day), which brought the Amendment into effect (there were only 48 states at the time, as Hawaii and Alaska were not yet states).
As for alcohol beverage stocks, it's been a very, er, mixed year. Take a look:
(Read more: Prohibition is over! Here's a bucket of beer stocks)
—By CNBC's Bob Pisani
Here is what I see happening today:
First, Jobs numbers confuse traders. The strong ADP jobs numbers, followed by the weak ISM Services number, which also included a weak employment component, has everyone scratching their heads...is the job market getting better or not?
The ADP report has not exactly had stellar accuracy recently. Last month ADP reported a gain of 130,000 (subsequently revised today to 184,000), while the Nonfarm Payroll report was 204,000.
Bottom line: Confirms an economy that is sending confusing signals about jobs; stocks not interested in moving ahead of Friday's number.
Second, Volatility Index (VIX) choppy but not flashing a clear warning. It climbed today, but then collapsed. It has gone from around 12.7 last Thursday to 14.5 today, not enough to cause alarm.
Third, budget deal near, a positive--and maybe a negative. Yes it's a modest deal with no Grand Bargain, but it removes any shutdown drama in January. That's a positive.
Here's the downside: Bernanke mentioned some time ago that the inability of the government to come up with a plan was a factor in the Fed declining to begin tapering--way back at the October meeting. Resolution of that might increase chances that tapering begins sooner.
Fourth, retail same-store sales out tomorrow: so far, it's "sell the news" on the Thanksgiving retail reports. The SPDR Retail ETF (XRT) is down three days in a row. It's a tough week for former leaders in this space:
Stocks came off their lows at 10:00 a.m. ET as several pieces of economic data came out. Many are citing the strong October New Home Sales report, well above expectations, though September's was below consensus.
However, investors are almost certainly focusing on the bond market reaction, and the bond market is reacting to the poor November ISM Services report, which came in at 53.9, well below expectations of 55.0.
Remember, the services sector accounts for roughly 80 percent of private-sector jobs.
More importantly, the employment component of ISM dropped off from 56.5 to 52.5. That is a significant drop and the lowest since May.
On that news, bond yields dropped slightly, and stocks rallied, likely because it reduces the chances for a Fed tapering in December.
It certainly is contradictory: The earlier ADP report indicated strength in private jobs growth for November. Stock futures dropped, bond yields rose at that time (8:15 a.m. ET) on concerns tapering is more likely in December.
Bottom line: the market is focused on job creation as the most important indicator of when the Fed will begin tapering. Any headline that sheds light on this will move markets.
Taper anxiety is feeding a sell-off that some argue should be embraced. Stocks dropped at the opening bell, with 10-year yields spiking 3 basis points to 2.85 percent after the November ADP Employment report came in stronger than expected, at 215,000 vs. 173,000 consensus.
Stocks, however, are still in an uptrend. Heavens, the anxiety!
The S&P 500 has been on a fairly steady climb for a full year. There have been dips--notably in May/June and October--but they have been shallow. Since then, its been higher highs and higher lows. We are only one percent off the historic highs. With all the hand-wringing, you'd think we were down 20 percent.
Here's what happened today:
First, the Dow Industrials and the S&P 500 are down three days in a row, but only one percent off their historic highs. Internals are not inspiring: Breadth has been poor for days (three-to-two declining/advancing stocks today), and more protection is being bought, since the CBOE Volatility Index (VIX) has popped to a one-and-a-half month high.
Defensive stocks like Consumer Staples and Utilities led the market.
Bottom line: This looks a lot like some traders are trying to lock in a part of their gains for the year.
Regardless: Down one percent after being up 26 percent for the year (for the S&P) is not unreasonable.
Second, after a great run, Europe was down big for a second day...France down 2.65 percent, for example, had its biggest drop since June. But Europe as a whole is up almost 25 percent since July!
Last, hot money going into Japan to chasing the six-year highs, using the WisdomTree Japan Hedged ETF (DXJ). WisdomTree plans to launch five new currency-hedged Japan sector ETFs, covering financials, real estate, capital goods, healthcare, and tech.
Mastercard capped a busy year by executing one of the main drivers of the stock rally: A buyback.
With the Fed taking a slow walk to the sidelines, diminished returns ahead are on the minds of many market participants.
It's time for bond traders to place their bets on whether the Fed is ready to begin tapering its bond buying program.