LIVE MARKETS-Dow, S&P 500 dip as economic worries rise

* Dow, S&P 500 dip; Nasdaq ends higher
* Energy weakest major S&P 500 sector; consumer
discretionary
leads gainers
* Dollar, gold dip; crude up; U.S. 10-yr Treasury yield
~0.88%

Nov 25 - Welcome to the home for real-time coverage of
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DOW, S&P 500 DIP AS ECONOMIC WORRIES RISE (1605 EST/2105
GMT)
The Dow and S&P 500 ended lower on Wednesday,
retreating a day after they posted record highs and the Dow
breached 30,000.
A surprise jump in weekly jobless claims underscored the
view that the labor market recovery was stalling amid a surge in
COVID-19 infections.
S&P 500 energy stocks fell 2.4% and led sector
declines. Other cyclical groups - including materials,
down 1.1%, and industrials, down 0.8% - also slid, in
a reversal of Tuesday's trade.
The technology sector gained 0.2%, however, and
the tech-heavy Nasdaq also rose.
Even with the dip in the S&P 500, the Cboe Volatility Index
fell modestly to 21.25, its lowest closing level since
February.
Here is the closing U.S. market snapshot:




(Caroline Valetkevitch)
*****

HOW OPTIONS DEALERS SUPERCHARGE STOCK SWINGS (1345 EST/1845
GMT)
As volume in U.S. equity options has surged this year,
market analysts have paid closer attention to their role in
exacerbating intraday market swings.
Now there's academic research providing supporting evidence
of such an effect - namely, as it relates to the dealers
providing liquidity in options markets.
Andrea Barbon, assistant professor in finance at the
University of St. Gallen in Switzerland, and Andrea Buraschi,
chair of finance at Imperial College Business School in London,
point to a condition known as negative gamma imbalance as a
driver of intraday volatility.
Massive purchases of short-term options among investors can
lead to heavy short positioning for dealers, creating a negative
gamma imbalance. As a result, dealers seek to hedge their
position by buying the underlying stocks as they go up in price
and selling them as they fall. This hedging can exacerbate price
moves in those assets as a result.
Several analysts have cited this phenomenon as a factor in
September's sharp sell-off in U.S. stocks, which was preceded by
heavy buying in call options on tech-related companies.
Barbon and Buraschi also point to negative gamma imbalance
as a factor in "flash crashes," such as in May 2010, though they
show that the introduction of new rules for circuit breakers
that year has diminished its impact.
"The result is certainly supportive of that regulatory
framework," Buraschi said in an interview with Reuters.
On the other hand, a positive gamma imbalance - in which
dealers have net long positions - can help dampen equity moves.
In that case, dealers will hedge by selling as stocks gain and
buying as stocks fall.
As options grow more popular, gamma imbalance may play a
greater role in daily trading. Barbon and Buraschi's analysis
shows that the distribution of gamma imbalance has widened over
the past two decades. (See the graphic from their research paper
below.)
As a result, it's an indicator that traders and risk
managers may need to pay close attention to, said Buraschi: "It
is very interesting as an early warning indicator of market
fragility."


(April Joyner)
*****


LOOKING LIKE A HEALTHY RECOVERY IN 2021 (1230 EST/1730 GMT)
Barclays strategists are projecting "solid positive returns"
in 2021, with a year-end price target on the S&P 500 of 4,000.
The index is trading at around 3,620 on Wednesday.
In their 2021 outlook report this week, they wrote that a
strong rebound in earnings per share will offset valuation
concerns.
A "trifecta of recent positive catalysts" should support he
market, they wrote.
"The new COVID-19 waves could lead to short-term volatility,
but the market is likely to look through this headwind."
They added: "As long as the vaccine news flow remains
positive, equities should look through the soft patch as they
have done historically."

(Caroline Valetkevitch)
*****

WEDNESDAY DATA AVALANCHE: A BEGGAR'S FEAST (1110 EST/1610
GMT)
"Everyone and their mother" rushed to release economic data
on Wednesday, providing a full feast of indicators to chew on
ahead of the Thanksgiving Holiday.
Together, the indicators provide a wide-angle, scattershot
view of consumers driving a plodding economic recovery, with
manufacturing and the housing market handily enduring the storm.

The number of American workers filing initial applications
for unemployment benefits unexpectedly rose again
last week, increasing to 778,000 from the previous week's
upwardly-revised 748,000.
Economists expected 730,000.
With new mandated shutdowns to curb the recent surge in
COVID-19 infections, there's likely more to come.
"With infections continuing to rise at an elevated pace and
curbs on business operations widening, layoffs are likely to
pick up over coming weeks," writes Rubeela Farooqi, chief U.S.
economist at High Frequency Economics.


Bruisingly high jobless claims bode ill for the consumer,
who contributes about 70% to U.S. GDP, as the holiday shopping
season approaches.
Speaking of GDP, the Commerce Department released its second
take on third-quarter data, which was slightly
adjusted downward to a 33.1% quarterly annualized rebound from
the prior quarter's historic drop. And consumer spending bounced
back to the tune of a whopping 40.6%.
Which brings us to personal consumption data, also released
today by the busy Commerce Department. Spending by the U.S.
consumer increased by 0.5% last month even as
personal income unexpectedly fell by 0.7%.
This drove the saving rate, seen by many as a gauge of
consumer optimism, down to a still-elevated 13.6%.
And with that, we segue gracefully into the University of
Michigan's consumer sentiment index, which came in
a hair lower than previously reported, and confirmed a 4.9 point
drop from October.
Together, October consumption and November sentiment data
suggest that while Americans may have been in a spending mood
last month, surging layoffs and shutdowns have soured their mood
and they could likely have tightened their purse strings this
month.


New orders for durable goods rose by 1.3% in
September, a faster pace than the 0.9% consensus, but a
deceleration from August, which was revised sharply higher to
2.1%.
The increase was driven by a surge in defense orders.
"The ground lost when orders plunged in March and April has
been mostly recovered," says Ian Shepherdson, chief economist at
Pantheon Macroeconomics. "The third - and likely final - Covid
wave is hammering the services sector, but it has not yet laid a
glove on manufacturing."


Pivoting back to the Commerce Department's Personal
Consumption data, the report also showed the core PCE price
index, which excludes food and energy prices and is
the Federal Reserve's preferred inflation yardstick, rose 1.4%
year-over-year in October, inline with the consensus, but below
the central bank's average 2% annual target.
Sales of newly constructed homes dropped 0.3% in
October, to 999,000 units at a seasonally-adjusted annualized
rate. While analysts expected a 1.5% increase, the unit count
was higher than anticipated due to September's upwardly-revised
data.
The housing market has been on fire in recent months as
surging demand and record low mortgage rates.
Which brings us to the Mortgage Bankers Association report
showing mortgage demand increasing by 3.9% last week as the
30-year fixed contract rate shed 7 basis points to
reach a new all-time low.
The tireless Commerce Department also released its
preliminary reading wholesale inventories and goods
trade balance for October.
The report showed that while product in U.S. warehouses
increased by 0.9% last month, the goods-trade gap widened to
$80.29 billion, as increasing imports outpaced export growth.

The stock market indexes on Wednesday are pulling back from
record highs, as investors shy away from economically sensitive
cyclicals and small caps.

(Stephen Culp)
*****

IF YOU BELIEVE IN INFLATION, HERE'S THE PLACE TO BE (1036
EST/1536 GMT)
Investors have become more at ease in playing the reflation
trade as of late after upbeat vaccine news this month sparked a
big bounce in so-called value stocks. Nevertheless, inflation
expectations in Europe and the U.S. remain low.
Bernstein says that's because doubts "about whether policy
can indeed overcome the deflationary forces that have been so
dominant in recent years" remain significant but still they
think the response to Covid will ultimately be inflationary.
"So where, exactly, might inflation show up?," strategists
led by Inigo Fraser-Jenkins wonder, noting how the potential for
price increases can be a catalyst for value-cyclical sectors.
Their conclusion is that airlines and autos, along with
aerospace/defence, are the place to be for investors who want
exposure to the potential for price increases.
Here are some tidbits on these sectors and below a chart
with inflation expectations over the past three years:
Autos: "Our analysts are seeing some very positive pricing
trends... they estimate that a 1%-point increase in new light
vehicle net pricing would increase the global profit pool for
OEMs by a staggering 20 billion euros"
Airlines: "In Europe low cost airlines and airlines focused
on short-haul will be able to raise prices first as there is a
lot of pent up vacation demand that will be released as soon as
travel restrictions are lifted... Our US analysts note a similar
sentiment."



(Danilo Masoni)
******


DOW, S&P 500 EASE, DAY AFTER RECORDS (1027 EST/1527 GMT)
The Dow and S&P 500 are lower in morning
trading on Wednesday, a day after they posted record highs and
the Dow breached 30,000.
A surprise jump in weekly jobless claims underscored the
view the labor market recovery was stalling amid a surge in
COVID-19 infections.
Energy and financials are leading sector
declines in a reversal of Tuesday's trade.
The Nasdaq is roughly flat, while the S&P 500 technology
sector is higher and is so far the day's
top-performing sector.
Here is the morning U.S. snapshot:



(Caroline Valetkevitch)
*****

BITCOIN? "NO PLACE IN PRIVATE CLIENT PORTFOLIOS" (0918
EST/1418 GMT)
With bitcoin closing to $20,000, many investors are
reassessing their views on the crypto currency amid wild
speculation it could even reach as high as $100,000 within a
year.
There are, however, many asset managers who are not buying.
Literally.
In a strategy note, Charlie Hines and Kevin Gardiner at
Rothschild Wealth Management argue that despite its past
correlation to gold, bitcoin’s latest surge is "indicative of
its inherent volatility" and "shows it behaving far more like a
risk asset than a hedge".
In a nutshell, not the cup of tea of Rothschild Wealth
Management.
"We still think it has no place in private client
portfolios", they write, adding they'd rather stick with a good
old-fashioned asset.
"We are not gold bugs, but when pushed for an alternative to
conventional cash we’d prefer the shiny metal to bitcoin".
Here's a good recent read on bitcoin:
Bitcoin at $100,000 in 2021? Outrageous to some, a
no-brainer for backers

(Julien Ponthus)
*****


DOW INDUSTRIALS: UNCHARTERED TERRITORY MAY HAVE ITS PITFALLS
(0900 EST/1400 GMT)
The Dow Jones industrial average ended Tuesday above
30k for the first time. And with its November thrust of more
than 13%, the blue-chip average is on track for its best monthly
gain since 1987.
That said, as the Dow explores unchartered territory, there
may still be pitfalls, in the form of log-scale resistance
lines, just ahead. (Click on chart below)
Indeed, the Dow is nearing a number of significant monthly
trendline hurdles. The resistance line from the 2000 high is now
at about 30,275. Resistance lines from early and late 2018 now
come in at about 30,750 and 30,100. Thus, these lines, which
essentially capped strength in early 2020, are only around 0.7%
to 3.5% above Tuesday's close.
The resistance line from the 2007 high now is at about
31,650, and the resistance line from the 1929 high is now at
about 32,500. These lines are around 5% to 8% above Tuesday's
close. All of these lines, of course, will ascend slightly in
December.
Meanwhile, a monthly momentum study is still a concern.
Although, the RSI is rising, it continues to lag. With this, a
protracted divergence remains in place from its early 2018 peak.
Just looking back over the past 20 years or so, major Dow
declines were preceded by monthly momentum divergence.




(Terence Gabriel)
*****

FOR WEDNESDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400
GMT - CLICK HERE:










(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)