Bitcoin Bonanza

Ureka! It finally happened late on Wednesday night: The market price for Bitcoin not only reached the $100,000 per token level, but soared past that level. As the zero-dark hours pass on Thursday morning, I see Bitcoin trading above $102,600 but have seen it trade above $103,500 overnight. The surge came within hours of President Elect Donald Trump having announced plans to nominate former SEC Commissioner Paul Atkins to return to that position in a post on his social media network, Truth Social.

Atkins had already served as SEC commissioner from 2002 to 2008 during the George W. Bush administration. The move fits neatly with former President Trump's clear intention to deregulate vast swaths of the U.S. economy. Atkins is not only well known as holding generally positive views on crypto currencies, but was also critical of the highly regulated banking environment that followed the Great Financial Crisis. That would include the controversial Dodd-Frank legislation, which he felt overburdened the banking industry.

Fed Snoozer

During what may have been the most boring interview since the dawn of recorded time, Fed Chair Jerome Powell, speaking to CNBC's Andrew Ross Sorkin at the New York times' DealBook conference, said that Bitcoin is "just like gold, only its virtual. It's digital." Powell added that Bitcoin is not being used as a medium of exchange, "People are not using it as a form of payment, or as a store of value. It's not a competitor for the dollar, it's really a competitor for gold."

On what Powell said, I have a couple of corrections. One, if Bitcoin is not being used as a store of value, then it is not serving a similar purpose to gold, if it is, then yes, they are currently serving the same purpose as neither currently serves as a medium of exchange.

Secondly, in a catastrophic situation, where electrical power is halted or denied for an extended period of time, one who owns physical gold or other precious metals, still has those assets in their possession. At that point, physical gold might actually find usage in trade or exchange. In that situation, all cryptocurrencies would just be "gone" until the lights came back on and internet service had been restored.

Fed Quotes

Powell and Sorkin ran through a number of topics. Powell is not afraid of a shadow Fed Chair being created and does expect to have a similar working relationship to the incoming Trump administration as he has with the outgoing Biden administration, Powell also does not feel that President Elect Trump will threaten the central bank's independence any more than other past presidents have. But in these two quotes that follow, Powell did go two places that might comfort Americans somewhat but force some discomfort at the same time.

On the economy:

“The economy is strong, and it’s stronger than we thought it was going to be in September. The downside risks appear to be less in the labor market, growth is definitely stronger than we thought, and inflation is coming a little higher. So, the good news is that we can afford to be a little more cautious as we try to find neutral.”

On fiscal policy (over which the Fed has no control):

“The U.S. federal budget is on an unsustainable path. The debt is not at an unsustainable level, but the path is unsustainable…We need the economy to grow faster than the debt, and that’s not happening.”

How Do You Say 'As Expected' in French?

The French government did indeed collapse on Wednesday. Both the right and left of the French legislature voted to bring down the just three-month-old government of Prime Minister Michel Barnier, who had been brought in to try to clean up the country's fiscal mess. President Emmanuel Macron hopes to install a new Prime Minister by this weekend when President Elect Trump and other global dignitaries are expected to descend on Paris for the re-opening of the Notre Dame Cathedral. U.S. financial markets have, to this point, been unaffected. 

Not Expected

Going back to the DealBook conference, Amazon AMZN founder Jeff Bezos seems to have changed his tune in regard to his opinion of Pres. Elect Trump. Bezos said, "I'm actually very optimistic this time around. He seems to have a lot of energy around reducing regulation. If I can help do that, I'm going to help him." 

The Washington Post, which is owned by Bezos and has historically had a contentious relationship with the former president, surprised all ahead of the election this year by not endorsing a presidential candidate. Editorial page staffers had drafted an endorsement of the Democratic Party candidate, which would be the norm for that paper, but Bezos had killed that plan in October. 

Marketplace & Trading

For the umpteenth time in a row, both the S&P 500 and Nasdaq Composite set record high closes on Wednesday. This time they were joined by the Dow Jones Industrial Average, which closed above the 45,000 level and is still considered to be a major U.S. equity index, at least by the financial media if not anyone who actually works in the industry. 

The Nasdaq Composite roared, gaining 1.3% for the day, as the S&P 500 tacked on 0.61%. Small to midcaps were once again, outperformed by the broader market, but for a nice change, actually closed higher for the session. These indexes gained between 0.28% and 0.42% for the day. Breadth was a bit on the sloppy side as it has been all week. 

Only four of the 11 S&P sector SPDR exchange-traded funds closed in the green on Wednesday, led by Tech XLK at +1.83%, while seven of these funds closed south of where they went out on Tuesday afternoon. Energy XLE was the big loser on Wednesday, suffering a beat-down of 2.41%. Within tech, both the Dow Jones U.S. Software Index (+2.72%) and Dow Jones US Semiconductor Index were hot (+2.52%). 

Software was led by Salesforce CRM and Datadog DDOG. Those two stocks closed up 10.99% and 7.01% respectively. On a trading note, I did initiate that CRM short position overnight that I wrote about on Thursday. Currently my net basis on that trade is $366.99. The Semis were led higher by Chris Versace name and The Street Pro Portfolio core holding Marvell Technology MRVL and Nvidia NVDA. Those two names were up 23.19% and 3.48% respectively. I also added to SentinelOne S overnight, which is down almost 15%. Yes, the stock is still trading well above net basis (now $20.70), but this will leave a hickey. I may add more later this morning depending on the action. 

As far as breadth goes, on Wednesday, winners beat losers by smidgen at the NYSE, but advancing volume took only a 41.2% share of composite NYSE-listed trade. Aggregate NYSE-listed trading volume contracted 2.3% on a day over day basis, probably rendering the apparent price discovery somewhat less meaningful. However, the exact opposite was true for Nasdaq-domiciled names. 

Winners beat losers by a rough 5-to-4 margin at the Nasdaq, as advancing volume took a 73.3% share of composite Nasdaq-listed activity. Aggregate trading volume in Nasdaq-listed securities absolutely exploded, ending up an incredible 31.1% on a day over day basis. Safe to say that there was some real meaning behind that conformation of the upward trend we discussed early last week? Sure, looks like it.

The Macro

Macroeconomic data was a bit on the weak side on Wednesday. The ADP Employment Report for November hit the tape at 146,000 private sector jobs created. Expectations had been for something in the mid-160,000 area. In addition, October private sector job creation was revised down from 233,000 to 184,000, leaving the November print up just 97,000 jobs from where we thought we were. 

What this means for the Bureau of Labor Statistics non-farm payrolls print tomorrow, I don't know. Readers will recall that the BLS reported just 12,000 jobs created in October. That could be revised higher for a change. Going back to the ADP Report for November, Businesses with under 50 employees saw net job creation shrink by 17,000 positions. Yes, that's a negative number. Yes, small business is usually considered the backbone of U.S. labor markets.

The ISM Services or Non-Manufacturing PMI certainly disappointed. The headline print still landed in a state of expansion at 52.1. That was both well below estimates that were up around 56 coming and shows a significant deceleration from prior months. New Orders, Production, and Employment all showed decelerating growth, while Supplier Deliveries, Inventories and New Export Orders all fell into a state of contraction. 

Order backlogs contracted for a fourth consecutive month, while Prices (of course) expanded for an incredible 90th consecutive month. Not only that, but Prices were the only major component within the survey that accelerated to the upside. Can't say we didn't tell the world and warn the Fed that prices were bottoming in September.

Economics (All Times Eastern)

08:30 - Balance of Trade (Oct): Last $-84.4B.

08:30 - Initial Jobless Claims (Weekly): Expecting 217K, Last 213K.

08:30 - Continuing Claims (Weekly): Last 1.907M.

10:30 - Natural Gas Inventories (Weekly): Last -2B cf.

The Fed (All Times Eastern)

11:30 - Speaker: Richmond Fed Pres. Tom Barkin.

Today's Earnings Highlights (Consensus EPS Expectations)

Before the Open: DG (.94), KFY (1.21), SIG (.33)

After the Close: DOCU (.87), HPE (.56), LULU (2.72), ULTA (4.51), VEEV (1.58)

At the time of publication, Guilfoyle was long AMZN, NVDA, S equity. Short CRM equity.