* Major U.S. averages in positive territory; small caps outperform
* S&P 500, Nasdaq hit new highs
* Energy leads major S&P sector gainers; cons disc weakest group
* Dollar, gold higher, crude slips
* U.S. 10-year Treasury yield ~0.91%
Dec 8 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com
FANG INDEX: STILL GETTING ITS TEETH "CLEANED" (1345 EST/1845 GMT)
The NYSE FANG+TM Index has long been a market leader. Indeed, this basket of high-growth tech stocks has captured the market's fancy for some time.
However, with 2020 nearing an end, and even with a 90% year-to-date rise, the FANG index has been cowering before another group, and that's clean energy.
The Invesco WilderHill Clean Energy ETF , whose top holdings include such stocks as NIO , JinkoSolar and SunPower is up more than 170% this year, and currently on track for its biggest yearly percentage rise in its full-year history going back to 2006.
Meanwhile, after essentially forming a double top from 2018-2020, the NYFANG/WilderHill Clean Energy Index ratio collapsed to a 4-1/2 year low in late November. (Click on chart below)
Despite a modest bounce off a support line drawn from a mid-2018 low, the ratio has turned down again. If it continues to decline below the November trough at 29.04, the ratio could be on track to meet the double-top pattern projection in the 21.00 area. This would suggest greater NYFANG underperformance vs ECO.
The ratio has work to do to turn its trend back up, but a push above the early December high at 32.44 can clear the way to challenge the sharply descending 50-day moving average. A reversal above the late-October high, at 42.11, would end the pattern of declining peaks and troughs from the April 2020 top.
(Terence Gabriel)
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PANDEMICS AND PARADIGMS: COVID'S LASTING EFFECTS ON BEHAVIOR AND INDUSTRY (1241 EST/1741 GMT)
Just as effects of COVID-19 can linger in recovered patients, some analysts see the pandemic driving behavioral shifts that will linger after the pandemic ends, and impact global industry.
A research note from Oxford Economics identifies these changes in behavior and explores how they might prompt shifts in the pre-COVID paradigm.
"Some behavioral shifts will leave scars in certain sectors, while others will open up opportunities in the year ahead," writes Stephen Foreman, lead industry economist at OE.
First, social distancing has sent digitalization into overdrive as companies and individuals adjust how they work, spend and interact, according to the note.
"We expect this trend to persist into next year, supporting growth prospects in sectors such as healthcare, financial services, and e-commerce," Foreman adds.
But he doesn't think all boats will rise with the digitalization tide, with the new work-from-home normal likely pressuring construction activity and commercial real estate.
Next, globalization is likely to be dampened by the pandemic, as companies seek to bring production closer to home.
"But such shifts take time, so are unlikely to be widely seen in 2021," Foreman says. "And the backlash isn't universal – the appetite for globalization is strong in Asia Pacific."
However, the travel industry is one sector that could see lasting effects of de-globalization. Oxford Economics sees domestic travel driving the recovery of commercial airlines, for example, with international demand as a share of total demand remaining lower next year and into the medium term.
Finally, Foreman believes the clean energy industry will be jump-started in COVID's wake.
"We’ve seen a clear desire to put green investment and tackling climate change at the forefront of recovery spending," Foreman says, citing allocations of the EU's recovery fund and the likelihood of president-elect Joe Biden reversing President Trump's executive actions on energy policy.
Electric vehicles will "break into the mainstream" in 2021, with market share in Europe and China reaching one-third of the total, the note says.
While this shift could benefit some chemical firms due to increased demand for materials used in EV construction, it could also have a negative impact on machinery makers, as battery-driven cars have fewer moving parts, as Foreman observes.
(Stephen Culp)
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SHAKESPEARE'S 2020 WINTER'S TALE ENDS WELL FOR EUROPE (1203 EST/1703 GMT)
A man named William Shakespeare being among the first batch of people being vaccinated in the UK against COVID-19 was definitely the feel-good story of the day in Europe.
According to Wikipedia, (the author of these lines confesses never having read that play) Shakespeare's Winter's Tale has some kind of bitter-sweet ending which is kind of what happened to the STOXX 600, which closed up 0.2% but with ugly pandemic and Brexit worries lingering in the background.
All in all it was a pretty mixed session with Paris and Milan losing 0.2% and London and Frankfurt making gains below 0.1%.
The lack of conviction is understandable given there's still no visibility on whether the EU and Britain will find a compromise to avoid a messy and painful start to 2021 if no post-Brexit trade deal is agreed.
And while the start of the vaccine roll-out in the UK is great news, the pandemic is still a threat for the coming months and is visibly weighing on Wall Street.
It must also be noted that the news that AstraZeneca and Oxford University have more work to do to confirm whether their COVID-19 vaccine can be 90% effective was also disappointing.
Some reading to catch up with European news:
In England, William Shakespeare receives a COVID-19 vaccine
In COVID-19 milestone for West, Britain starts mass vaccination
As Brexit deadline looms, Johnson says Britain may abandon trade talks
Testing times: More work needed on Astra/Oxford vaccine trials
(Julien Ponthus)
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CAN THE RALLY KEEP GOING WITHOUT TECH? (1106 EST/1606 GMT)
While the S&P 500 has made several record highs since early September - four intraday record highs and seven record closes to be precise - Bespoke Investment Group points out that it reached these records despite the fact that the benchmark's heavyweight technology sector index has not had a 52 week high in 50 trading sessions.
"Given that it's the largest sector in the market by a wide margin, there have been relatively few instances in the past where the S&P 500 has made a new 52-week high and the Technology sector had yet to arrive at the party," said Bespoke.
According to Bespoke there have only been eleven other instances since 1990 where the S&P 500 made a 52-week high while tech was at least 50 trading days removed from its last high.
So can the market continue to rally without more tech sector records? Looking at history, Bespoke says the answer is yes.
In the past when the S&P has hit record highs without tech, over the following one and three months, the benchmark's average and median returns, as well as its frequency of positive returns, outstripped comparable returns for the Technology sector, according to the research.
And in those individual periods technology outperformed the broader market only four out of those 11 instances, Bespoke said.
The last time the S&P tech sector hit a record high was on Sept. 2 and its intraday high so far on Tuesday was roughly 0.8% below that record.
(Sinéad Carew)
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SMALL BUSINESS OWNERS: STILL SMILING, BUT WITH WORRY LINES (1004 EST/1504 GMT)
Small business sentiment in the U.S. remained essentially optimistic last month, but uncertainties surrounding the upcoming Georgia run-off elections - which will determine which party controls the Senate - and new restrictions to curb a spiking pandemic have slightly dulled the shine on their shoes.
The National Federation of Independent Business (NFIB) Optimism Index dipped nearly three points in November to a reading of 101.4, the largest one-month drop since the beginning of the recovery. Still, it remains above the 47-year average of 98.
Six of the ten subcomponents declined, while four increased. Expectations of improving business conditions over the next six months slid 19 points to a net positive 8%, the lowest level since April. The Uncertainty index abated, but remains at "historically high" levels, according to NFIB.
Survey participants said finding qualified workers was their top business problem, exceeding taxes, regulations and poor sales.
Depressed inventories, a theme repeated in GDP and PMI data, remain an overhang. Although a majority of owners described their inventories as "too low" plans to invest in more inventory accumulation collapsed from record levels.
"The recovery will remain uneven as long as we see state and local mandates that target business conditions and disproportionately affect small businesses," writes Bill Dunkelberg, chief economist at NFIB.
Oren Klachkin, lead U.S. economist at Oxford Economics, agrees.
"Small businesses will face the greatest risk of failure as the recovery slows, especially if lawmakers don’t offer more aid," Klachkin says.
Separately, the Labor Department released revised data for third-quarter labor costs and productivity.
Labor costs fell 6.6% in the quarter, shallower than the 8.9% previously reported, while productivity - or output per hour - rose by 4.6%, slower than the originally-stated 4.9% increase.
"The data have been especially volatile quarter-to-quarter reflecting the impact of Covid-19 on output, hours and compensation," says Rubeela Farooqi, chief U.S. economist at High Frequency Economics. "The underlying trend in productivity will likely moderate from the current pace over coming quarters."
Caution kept buyers at bay in early trading.
All three major U.S. stock indexes are red, with losses in market-leading mega-cap tech and tech-adjacent shares putting the Nasdaq on course to snap its three-day record closing streak.
(Stephen Culp)
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PRODUCTIVITY BOUNCE ON THE HORIZON (0913 EST/1413 GMT)
Whether underpriced value is finally overtaking growth stocks remains a question on Wall Street, but as the go-go era tapers off, several years of stronger productivity could arrive to bolster equities, tap down inflation and hamper bond returns.
The observation comes from Jim Paulsen, chief investment strategist at the Leuthold Group in Minneapolis, who says while an imperfect relationship, more robust productivity often has followed periods of growth-style dominance after World War II.
But when value beats growth returns, weak productivity too often rules, Paulsen said in a note to investors.
It takes time before a new product's innovative attributes are fully communicated, disseminated, understood and implemented into business and households, Paulsen said. That's why there is a multi-year lag between a growth cycle and rising productivity.
Since 1947 as productivity rose, average inflation weakened and average bond returns declined. The usual negative linkage between inflation and bond returns is altered by productivity.
Overall economic growth tends to be healthy, forcing yields higher and bond returns lower. If the U.S. economy is poised for a period of superior productivity, investors should prepare for a challenging bond market, even with modest inflation, but a rising equity market, he said.
The future power of U.S. core capital goods orders after they recently surged to an all-time record during a pandemic should not be underestimated, Paulsen said.
(Herbert Lash)
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S&P 500: FORK IN THE SKY? (0845 EST/1345 GMT)
As the S&P 500 index attempts to forthrightly thrust above a significant resistance barrier , the Northern Hemisphere's winter solstice is just over the horizon. Thus, it may shortly become clear whether the benchmark index is on the verge of a moon-shot to fresh records, or if the solstice's orb of influence will coincide with another major reversal.
Proponents of Gann Theory, or methods of technical analysis developed by trader W.D. Gann, may look for either acceleration of the prevailing trend, or a reversal, around the summer and winter solstices, as well as the fall and spring equinoxes.
Looking back over the past 2 years or so there has been interesting market action around these events. So far in 2020, these dates have all coincided with then end of periods of significant decline. (Click on chart below)
The 2020 spring equinox took place on Thursday, March 19, at 11:49 PM EDT. Two trading days later, the S&P 500 put in a surprise bottom that ended the more than 30% February/March bear market.
The summer solstice occurred on Saturday, June 20, at 5:43 PM EDT. Earlier that week, the SPX abruptly ended what was a more than 8% one-week slide.
The fall equinox took place on Tuesday, September 22 at 09:30 AM EDT. Just one day later, the SPX ended what was essentially a 10% correction from its early September high.
The coming solstice happens at 5:02 AM EST on December 21st. It now remains to be seen if around this date, the SPX will accelerate higher, or succumb to gravity.
Meanwhile, amid the pitch and yaw, there are signs of an overheated market , permeated by great complacency
. That said, advance/decline lines are still providing tailwinds.
(Terence Gabriel)
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FOR TUESDAY'S LIVE MARKETS' POSTS PRIOR TO 0845 EST/1345 GMT - CLICK HERE:
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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)