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Need to Know

Dec. 13, 2016, 4:32 p.m. EST

Time to cash in your bank stocks, going by this chart

Critical information for the U.S. trading day

By Victor Reklaitis, MarketWatch


Getty Images
Game over for the rally in bank stocks?

The 20,000 mark is acting like a magnet again on the dogged Dow, confounding all those who keep saying “Whoa, there!”

Yet the rein-it-in crowd is digging in its heels, even as stock futures point to another record-setting day.

Investors have been embracing change and cheering the U.S. election, the U.K.’s Brexit vote and Italy’s referendum—but their glee might not last, suggests Ameriprise Financial’s David Joy.

“Time will tell if such self-satisfaction will persist, or whether it evolves into a case of buyer’s remorse,” the strategist writes .

Our call of the day is also downbeat, saying it’s time to ditch bank stocks, those key leaders in the Trump rally.

Following a “near-vertical move in oh-so-many financial stocks,” it’s time to trim your position if you’ve bet on this sector, argues Cornerstone Macro’s Carter Braxton Worth. Don’t chase financials (PSE:XLF) if you weren’t wagering that much on them, and stay short if you’ve been betting against the sector, he says.

Worth uses charts like the one below to make his case. It shows how the Nasdaq Bank Index (AMERICAN:BANK)  has been living 29.2% beyond its 150-day moving average.


Cornerstone Macro

Up until now, that gauge for banks had never in its history traded more than 25% above this “smoothing mechanism,” the technical analyst writes in a note. “Trimming makes sense we’d say. Sell all? Also reasonable, to our eye.”

In October, Worth offered a similar argument for selling Nvidia (NAS:NVDA)  that hasn’t worked out at all, as the highflying tech stock just keeps climbing. But at least he’s not alone with his call on banks (PSE:KBE) . Other analysts are also warning the rally has gone too far (though bulls argue there is still room to run ).

What could keep climbing? Our chart of the day below highlights the bullish buzz around airlines (PSE:JETS) .

Key market gauges

The Dow Jones Industrial Average (DOW:DJIA) , S&P 500 index (S&P:SPX)  and Nasdaq Composite Index (AMERICAN:COMP) all were trading higher, after the Dow closed at a record Monday. See the Market Snapshot column for the latest action.

The chart


MKM

Airline stocks (1083:XX:XAL) “continue to fly,” says Jonathan Krinsky, chief market technician at MKM Partners, in a note. They may be due for a pause in the short term, but overall they are climbing after moving largely sideways and lower for 16 years, he says.

J. Lyons Fund Management’s Dana Lyons is also sounding chipper about carriers (DOW:XX:DJUSAR) . There is bullish potential for airlines, and no shortage of applicable puns (think “ready for takeoff” or “blue skies above”), he writes .

The buzz


Getty Images
A person walks past the Pilsner Urquell logo at a brewery.

In a $7.8 billion deal, Anheuser-Busch InBev (NYS:BUD)  plans to sell Pilsner Urquell and other European beer brands to Japan’s Asahi Group, which previously bought Peroni and Grolsch.

Apple (NAS:AAPL) has considered investing in a $100 billion tech fund being raised by Japan’s SoftBank.

Dow 21,000 looks to be the far more important target, says a Barron’s columnist .

President-elect Donald Trump has officially named Exxon Mobil (NYS:XOM)  CEO Rex Tillerson as his pick for secretary of state, and he is expected to tap former Texas Gov. Rick Perry for energy (PSE:XLE) secretary. Plus, Trump delayed a news conference and now won’t say until January how he plans to handle the overlap between his business empire and his new gig.

Wal-Mart (NYS:WMT)  might be Trump’s next target, but Starbucks (NAS:SBUX)  looks safe.

The economy

The Federal Reserve’s two-day meeting is due to kick off today. Policy makers had better unveil an interest-rate hike tomorrow, if they don’t want to really surprise markets.

Fed chief Janet Yellen is expected to signal that investors shouldn’t expect a flurry of rate rises, while the central bank is likely to ignore the elephant in the room.

In other economic news, small-business sentiment has surged, a November reading on U.S. import prices showed a drop, and reports on China’s industrial production and retail sales edged forecasts.

Check out: MarketWatch’s Economic Calendar

The stat

100,000—That is how many civilians are trapped in Aleppo, fearing for their lives as Syrian forces take control from rebel fighters, according to aid groups and media reports . Reports of on-the-spot executions and children being killed in their own homes have prompted calls for the international community to organize a safe passage out.

The quote

“He has little political experience, but, maybe, it’s good,” Mikhail Gorbachev is among the Russians who like Trump.

In an interview marking 25 years since the USSR’s breakup, the former Soviet leader also voiced hope for better U.S.-Russia relations and criticized how America handled the end of the Cold War.

Random reads

Twitter’s (NYS:TWTR)  Jack Dorsey plans to interview Edward Snowden today on Periscope.

There are hundreds of new and redesigned emoji in Apple’s iOS 10.2.

Teens are drinking and smoking less , plus doing fewer drugs.

It is possible to avoid being abducted in Australia by texting your dad back home.

Change your behavior by doing this .

And here is this year’s must-have toy:

Click to Play

Hatchimal fever takes parents on a global hunt

Hatchimals, this year's must-have gift for Christmas, sold out within weeks of their October introduction in the U.S. and Europe.

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