The overall trend here is still towards utilities outperformance, but its behavior has been admittedly pretty choppy. If the November inflation number falls again next week, it could ignite worries that the Fed will overshoot, further strengthening the case for Treasuries. Why are TIPS outperforming even red-hot Treasuries?

Non-energy cyclicals are still holding up well here even though risk-off behavior continues to emerge. The latest PMI report scheduled to hit this week is likely to tell us that the manufacturing sector is officially contracting after slowing for the past year. Falling interest rates have taken some of the bite out of bank stocks lately, but that doesn’t take away from the fact that conditions have definitely improved.

Industrials have slowed down a bit over the past couple weeks, but that’s understandable given the recent breakout. The commodities market continues to stabilize, but I’m worried about the performance of lumber here. The latest decline in interest rates has already resulted in a short-term spike in mortgage activity, which in isolation should give the sector a bit of a boost.