LIVE MARKETS-Consumer confidence, home sales, GDP: The winter of our discontent
* Dow, S&P red; Nasdaq advances* Comm svcs weakest S&P sector; tech leads gainers
* STOXX 600 up ~1%
* Dollar up; gold, NYMEX crude down
* US 10-Year Treasury yield 0.93%
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CONSUMER CONFIDENCE, HOME SALES, GDP: THE WINTER OF OUR DISCONTENT (1105 EST/1605 GMT)
Data this month, last month and last quarter were released on Tuesday, providing a portrait in triptych of a pandemic battered economy limping toward the finish line of an exceptionally challenging year.
Consumer optimism unexpectedly soured this month, according to the Conference Board's consumer confidence index .
The index fell to a reading of 88.6 from November's downwardly-revised 92.9 and well below the 97 consensus.
While the 'expectations' component edged higher, this gain was more than offset by surging pessimism about the current state of affairs.
"Consumers' assessment of current conditions deteriorated sharply in December, as the resurgence of COVID-19 remains a drag on confidence," writes Lynn Franco, senior director of Economic Indicators at The Conference Board.
Still, as seen in the chart below, 'current conditions' remains slightly higher than 'expectations.' Historically, that relationship is reversed when sustained economic recovery is in the cards.
Last month, sales of pre-owned homes suffered a steeper-than-expected decline, dropping 2.5% to 6.69 million units at a seasonally-adjusted, annualized rate, per the National Association of Realtors.
It marked the first decline in six months and came in worse than the 1% drop analysts expected.
While historically low mortgage rates and a rush to the suburbs in search of lower population density and work-from-home office space has made the housing market a bright spot in an otherwise lackluster economic recovery, the spike in demand has also driven supply to historic lows and strained affordability.
"The combination of tight inventories and strong demand have pushed home prices higher, which will price some buyers out of the market, particularly given weak labor market conditions amid the latest surge in the pandemic," says Nancy Vanden Hauten, lead U.S. economist at Oxford Economics (OE).
Finally, in ancient history news, the Commerce Department released its third and final reading of the third-quarter's record GDP surge, revising it higher to a 33.4% quarterly annualized rate.
The surge can be attributed to massive fiscal stimulus spending and followed the 31.4% plunge in the April-to-June quarter, the biggest drop on record.
But much of the third quarter's velocity has been lost.
"On the eve of 2021, the economy carries very little momentum as a catastrophic third Covid wave is limiting mobility, curbing employment and constraining demand," says Gregory Daco, chief U.S. economist at OE. "But, as the cocktail of increased government transfers and broad-based vaccinations takes shape, we should expect gradually firming activity leading to a mini-summer boom."
And now we come full-circle back to the consumer, whose spending contributes about 70% of U.S. economic growth. The personal expenditures component of GDP rose by a remarkable 41%, up 40 basis points from the previous reading.
WHY ISN'T THE MARKET CELEBRATING THE STIMULUS? (0945 EST/1445 GMT)
With the passage, finally, of a fresh stimulus package in Washington, Mizuho's chief economist for the Americas, Steve Ricchiuto, writes you would think this should be prompting a market rally.
So why instead was the market weak on Monday and going into Tuesday? The answer, according to Ricchiuto is in the calendar.
Investors that had a good 2020 are likely already set up for the year-end, he says, suggesting that the only people trading this late are those who have lost out in the equities rally and sell-off of the dollar.
"As such, the doom and gloom crowd are able to push the market around within well-specified parameters," the economist said, but he added: "Should the markets get lopsided, it is likely that more optimistic investors will get pulled in off the sidelines to take advantage of any opportunities which arise."
These investors tend to sit on the sidelines at this point because most year-ahead forecasts "go awry between mid-December and mid-January."
So it makes sense for the investors who had a good year to lock in profits, and wait until after they get a view on the holiday season and, in 2020 specifically, until they "have a better handle on the balance between the second wave of virus infections and the roll-out of the vaccine."
With this in mind, Ricchiuto expects markets "drift sideways in a trading range until there is better visibility" after Q4 pre-announcements and after companies have begun giving their forecasts for the year ahead, he wrote.
S&P 500: INSIDE THE LINES (0900 EST/1400 GMT)
The S&P 500 index continues to flirt with two log-scale weekly trend lines. Action so far this week has one of the lines as resistance and the other as support. (Click on chart below)
The SPX gyrated on Monday in a 3,636.48-3,702.90 range. Thus, the day's high and low were inside a zone defined by the broken resistance line from early 2018, which is now acting as support around 3,631, and the still sticky resistance line from late 2018 which now around 3,703.
Despite having penetrated the resistance line from late 2018 over the past month, the SPX has only managed two weekly closes above it, and by less than 0.6% each time. So the index has struggled to pull away from it.
That said, the index is attempting its 5th straight weekly finish above the line which is now support. A definitive break of the modestly expanding range defined by these lines may serve to bring an end to the recent choppy action and spark the next trend.
Meanwhile, of concern, weekly momentum is still lagging. The RSI appears to be rolling under both the 70.00 overbought threshold, and a resistance line from its early 2020 high.
Just going back to late 2018, SPX highs of varying degree were preceded by weekly momentum divergence.
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Existing home sales
(Terence Gabriel is a Reuters market analyst. The views
expressed are his own