The Week On Wall Street
A Friday rally turned an otherwise mixed week for stocks into a solid performance.
The Dow Jones Industrial Average picked up 2.42%, while the Standard & Poor’s 500 gained 0.77%. The Nasdaq Composite index rose 0.38% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, ended marginally higher by 0.13%.
Stocks Move Higher
The stock market digested November’s robust gains for much of last week but rallied strongly amid falling bond yields on the last trading day. Market sentiment remained positive as the Fed’s preferred measure of inflation showed ongoing signs of softening inflation pressures, boosting hopes that the Fed may be able to end its rate hikes and consider rate cuts sometime next year. Investors also welcomed news of solid spending in early holiday sales reports. The declines in bond yields reflect that the financial markets are positioning for a rate cut soon, even brushing off Fed Chair Powell’s Friday comments suggesting it was premature to consider monetary loosening.
The Personal Consumption Expenditures Price index (PCE)–the Fed’s preferred measure of inflation–was released last week, showing core PCE (excludes energy and food) rose 0.2% in October and 3.5% from a year ago. Both were lower than September’s readings of 0.3% and 3.7%, respectively. Perhaps most notably, core prices rose at a 2.5% annualized rate over the last six months, close to the Fed’s target rate and a big improvement over the previous six-month annualized rate of 4.5% ending April. The report also reflected a slowdown in consumer spending, as October’s 0.2% increase was lower than September’s 0.7% gain, a possible indication of the impact of the resumption of student loan repayments, higher prices and shrinking savings.
This Week: Key Economic Data
Monday: Factory Orders.
Tuesday: Institute for Supply Management (ISM) Services Index. Job Openings and Labor Turnover Survey (JOLTS).
Wednesday: Automated Data Processing (ADP) Employment Report.
Thursday: Jobless Claims.
Friday: Employment Situation. Consumer Sentiment.
This Week: Notable Companies Reporting Earnings
Tuesday: AutoZone, Inc. (AZO), MongoDB, Inc. (MDB)
Thursday: Broadcom, Inc. (AVGO), Dollar General Corporation (DG)
The markets continue to grind higher. We may be a little overbought in the very near term. There isn’t much news until next week on Tuesday and Wednesday when we’ll get a couple of whoppers. Inflation data (CPI) for November on Tuesday next week and The Fed will make another interest rate decision on Wednesday. No one expects rates to move next week. The big news will come out of the press conference on what Powell has to say about future rate meetings. The markets are starting to bet on rate cuts sometime in the first half of next year. These two points are apt to move markets next week. Given the right data on Tuesday and what Powell says Wednesday it could fuel a bit of a FOMO (fear of missing out) rally into year end. We’ll find out next week. Stay tuned…