THE WEEK ON WALL STREET
A Federal Reserve announcement on tapering, a fresh batch of corporate profits,
and encouraging economic data lifted stocks to another weekly gain. The Dow Jones
Industrial Average rose 1.42%, while the Standard & Poor’s 500 advanced 2.00%.
The Nasdaq Composite index led, tacking on 3.05%. The MSCI EAFE index, which
tracks developed overseas stock markets, added 1.58%.
STOCKS POWER HIGHER
Stocks marched higher throughout the week, lifted by a succession of positive
corporate earnings surprises, optimistic forward guidance by some companies,
and healthy economic data. Continued strong third-quarter profits reinforced the
narrative that businesses were able to meet strong consumer demand and maintain
robust profit margins, despite the headwinds of inflation and supply-chain knots.
Investors were unfazed by the Fed’s mid-week announcement that it would begin
its bond purchase tapering plans, in part, because it had long been telegraphed and
Fed Chair Powell’s optimistic analysis of the current state of the economy. Also
cheered was the announcement of a new COVID-19 antiviral pill and a powerful
rebound in job creation, driving stocks to new heights to close out the week.
THE FED SPEAKS
In an eagerly awaited November meeting of the FOMC (Federal Open Market
Committee), the Fed pulled the trigger on its plan to taper monthly bond purchases.
Fed tapering will begin this month with reductions of $15 billion per month ($10
billion in Treasurys and $5 billion in mortgage-backed securities) that will end this
pandemic-era policy response by July 2022. The Fed reiterated its belief that
inflation remained transitory, though conceding it had underestimated its acceleration
and persistence; it did not expect interest rates to be raised until after the completion
of the tapering program. Powell expects inflation to stay elevated until mid-2022
when he anticipates supply-chain bottlenecks to clear.
THE WEEK AHEAD: KEY ECONOMIC DATA
Wednesday: Consumer Price Index (CPI). Jobless Claims.
Friday: Consumer Sentiment. Job Openings and Labor Turnover Survey (JOLTS).
THE WEEK AHEAD: NOTABLE COMPANIES REPORTING EARNINGS
Monday: PayPal Holdings, Inc. (PYPL).
Tuesday: D.R. Horton, Inc. (DHI), Sysco Corporation (SYY), Palantir Technologies, Inc.
(PLTR), DoorDash, Inc. (DASH), Coinbase Global, Inc. (COIN), Roblox Corporation
Wednesday: The Walt Disney Company (DIS), Affirm Holdings, Inc. (AFRM).
Friday: AstraZeneca PLC (AZN).
The broader indices continued to push forward last week and led to S&P500 making
new all-time highs at some point each day last week. Even with the current bull run,
the most recent Conference Board survey showed that more investors expect equities
to move lower rather than higher over the upcoming months. That sentiment has
historically led to higher equity prices, not lower. The S&P 500 has also enjoyed a
near record number of days, closing at all-time highs during the last two weeks.
That type of extreme buying has also led to new highs. It looks like Santa may
indeed be bringing higher stock prices. Keep in mind our wonderful representatives
in Washington must raise the debt ceiling again in December, so there may be some
bumps along the way.
Have a great week!