* Nasdaq advances, S&P ~flat, Dow red; small caps outperform * Comm svcs weakest S&P sector; only tech, real estate positive * Dollar up; gold, NYMEX crude down * US 10-Year Treasury yield 0.92% Dec 22 - 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 CHIP STOCKS DIP, BUT JEFFERIES IS BULLISH (1345 EST/1845 GMT) U.S. chip stocks are recovering some of their earlier losses on Tuesday, pulled lower by Qualcomm QCOM.O and lifted by Broadcom AVGO.O , while Jefferies says it is increasingly confident in the sector following recent channel checks. Qualcomm is dropping 0.8% and Broadcom is adding 1%. Intel INTC.O is losing 0.6%, bringing its decline to 9% since a report on Friday that Microsoft MSFT.O is working on in-house processors for the servers running its cloud-computing services and Surface line of personal computers, potentially cutting its reliance on Intel. urn:newsml:reuters.com:*:nL4N2IY3WL The Philadelphia Semiconductor index .SOX is last down around 0.1%, recovering from an earlier loss of almost 1%. Semiconductor stocks have surged in 2020, with the Philadelphia index up 48% YTD. Increased streaming and other changes in people's habits caused by the coronavirus pandemic have driven demand for chips used in data centers, laptops and other devices. As well, chipmakers have struggled to meet global demand following under-investment in 8-inch chip manufacturing plants. urn:newsml:reuters.com:*:nL1N2IX10E "Semis are in an optimal position where lead times are stretching, but inventories haven't materially restocked," Jefferies analyst Mark Lipacis wrote in a client note outlining comments made by a supply chain consultant on a recent call. "We sense some caution in semis among investors due to the recent outperformance vs SPX, but we think upside surprises in 1H21 will trump valuations," Lipacis wrote. Among his top picks in semis, Lipacis points to Microchip Technology MCHP.O , Analog Devices ADI.O , Tower Semiconductor TSEM.TA , Advanced Micro AMD.O and Nvidia NVDA.O . (Noel Randewich) ***** WRAPPED UP FISCAL PACKAGE MAY BE A 2021 GIFT (1230 EST/1730 GMT) In the wake of the long-awaited U.S. fiscal stimulus deal aimed at cushioning slowing economic growth this winter and supporting a solid, vaccine-related growth recovery by the spring, Gary Schlossberg, Global Strategist at the Wells Fargo Investment Institute (WFII), has some thoughts on the outlook for 2021. Indeed, for 2021, Schlossberg continues to favor the "higher-quality theme." He says his preference for companies with stable profitability and low financial leverage leads him to U.S. stocks over international, as well as U.S. large and mid-caps rather U.S. small caps. In terms of sectors with high-quality characteristics, WFII favors communications services, consumer discretionary, health care and tech. Looking beyond the potential for slowing growth in the first quarter of 2021, Schlossberg believes the economic and earnings recovery should then strengthen. Thus, as next year develops he thinks "opportunities may arise in some traditional cyclical sectors." He says WFII remains favorable on consumer discretionary, given the sector's close ties to an improving economy. He also notes WFII recently upgraded materials to favorable and industrials to neutral, "reflecting a weaker US dollar, improving fundamentals, and the possibility of increased infrastructure spending." (Terence Gabriel) ***** EVEN WITH APPLE BOOST, S&P 500 BARELY BUDGING (1123 EST/1523 GMT) The S&P 500 .SPX is little changed so far on Tuesday. Indeed, the benchmark index has been churning around the flat line, and is now down around 3 points, or 0.09%. This despite Apple AAPL.O providing around a 6 point boost to the index. Apple, up nearly 3%, is moving forward with self-driving car tech and is targeting 2024 to produce a passenger vehicle, people familiar with the matter told Reuters. urn:newsml:reuters.com:*:nL4N2J2286 Central to AAPL's strategy is a new battery design that could "radically" reduce the cost of batteries and increase the vehicle's range. With this news, Tesla TSLA.O shares are off around 4%, and providing the biggest drag on the benchmark index. Meanwhile, LIDAR stocks are also getting a boost from the Apple report. urn:newsml:reuters.com:*:nL4N2J22PJ Luminar Technologies LAZR.O is up around 10%, and Velodyne VLDR.O is up around 15%. Microvision MVIS.O is last up more than 15%, though its shares are well off the day's high after a bearish tweet from Hindenburg Research. urn:newsml:reuters.com:*:nFWN2J20AV In any event, Tuesday's weak economic data seems to be sapping some of the goodwill from the passing of a much-awaited $892 billion relief bill. .N More economically sensitive sectors are among the day's losers, and growth .IGX is outperforming value .IVX , In fact, the IGX/IVX ratio is popping to a 7-week high. Here is where markets now stand: (Terence Gabriel) ***** 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 USCONC=ECI . 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 USEHS=ECI 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 USGDPF=ECI surge, revising it higher to a 33.4% quarterly annualized rate. urn:newsml:reuters.com:*:nL1N2J11LO 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. (Stephen Culp) ***** 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. (Sinéad Carew) ***** S&P 500: INSIDE THE LINES (0900 EST/1400 GMT) The S&P 500 index .SPX 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. (Terence Gabriel) ***** FOR TUESDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400 GMT - CLICK HERE: urn:newsml:reuters.com:*:nL1N2J20U9 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ SPX12222020 https://tmsnrt.rs/3nGy4AN Consumer confidence https://tmsnrt.rs/2M1hH3Z Existing home sales https://tmsnrt.rs/3nUGrsV GDP https://tmsnrt.rs/3nIACyy morning1222020 https://tmsnrt.rs/34Eve8a ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Terence Gabriel is a Reuters market analyst. The views expressed are his own)