The Week in Review 11/20/2023
“We can know only that we know nothing. And that is the highest degree of human wisdom.”
– Leo Tolstoy
Good Morning ,
Another winning week for the stock market…. as we prepare for the Thanksgiving holidays, investors were in a buying mood.
The S&P 500, which flirted with 4,100 in late October, closed above the 4,500 level on Friday.
The positive bias was partially driven by a recognition that there wasn't a lot of selling activity after the big run, along with a fear of missing out on further gains during a seasonally strong time of year for the market.
The bulk of this week gains followed the October Consumer Price Index on Tuesday, which corroborated the notion that the Fed is done raising rates.
That report, along with the October Producer Price Index, the October Retail Sales, the weekly initial jobless claims, and the October Housing Starts data, all seemed consistent with a soft landing scenario for the economy.
The Bureau of Labor Statistics reported headline CPI unchanged in the month of October and up 3.2% year-over-year. Lower energy prices were a key factor during October, down 2.5% in the month. Core inflation, which removes food and energy, rose 0.2% for the month and is up 4.0% year-over-year.
The fed funds futures market priced out the probability of any additional rate hikes by the Fed, and now sees a 61.7% probability of the first rate cut in May 2024, according to the CME FedWatch Tool.
Treasury yields took a sharp turn lower in response to the data and the idea that the Fed is done raising rates. The 2-yr note yield fell 15 basis points this week to 4.90%. The 10-yr note yield declined 19 basis points to 4.44%.
The rate-sensitive S&P 500 sectors registered some of the largest gains, but all 11 sectors traded higher last week. The real estate (+4.5%), financials (+3.3%), and utilities (+3.0%) sectors were standouts in that respect. The consumer staples (+0.6%) and energy (+0.9%) sectors were the only ones to gain less than 1.0%.
Market participants were digesting another batch of earnings news. Walmart and Target headlined the calendar, both making mention of a more cautious-minded consumer.
Target registered a big gain after reporting results. Gap, Ross Stores, and Macy's were also standout winners after reporting earnings.
Leading chip equipment maker Applied Materials also reported earnings and logged a decline following a Reuters report that it is the subject of a DOJ criminal probe over shipments to China's top chipmaker, SMIC.
In other news, Congress passed a continuing resolution to avoid a government shutdown, and President Biden and President Xi agreed to resume high-level, direct military talks, and bilateral cooperation in combating global illicit drug manufacturing and trafficking.
Market Snapshot…
- Oil Prices – Oil prices bounced back last Friday after a selloff pushed crude into a bear market earlier in the week. West Texas Intermediate crude futures (WTI) rose $2.99, or 4.10% to close at $75.89 a barrel. Brent crude futures rose $3.19, or 4.12%, to close at $80.61 a barrel.
- Gold– Gold prices registered a big weekly gain as the dollar and Treasury yields weakened. Spot Gold was steady and up about 2.3% to $1,980.13 per ounce. U.S. gold futures settled down 0.1% to $1,984.70. Silver finished the week at $23.852.
- S. Dollar– The dollar posted one of its steepest weekly declines over concerns about the weakening global economy. The dollar index fell 0.46% and was at 103.82. Euro/US$ exchange rates are now 1.093.
- S. Treasury Rates– Treasury yields hit their lowest level in about two months as investors feel the Fed’s rate hikes may finally be over. The yield on the 10-year Treasury note traded around 4.44% at the end of the day Friday.
- Asian shares were mixed in overnight trading.
- European markets are trading a little lower.
- Domestic markets are trading mixed this morning.
This week will be shortened due to the Thanksgiving holiday. However, we will still receive some economic news throughout the week. Monday will feature the U.S. Leading Index, Tuesday will be Existing Home Sales for October, Wednesday will be University of Michigan survey data and FOMC meeting minutes, and Friday will report preliminary Manufacturing and Services PMI for November.
The markets will be closed on Thursday and close at 1:00 p.m. ET on Friday in observance of Thanksgiving.
Have a safe and wonderful Thanksgiving Day!
The opinions expressed herein are those of Michael Hilger and not necessarily those of Raymond James & Associates, Inc., and are subject to change without notice. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Investing involves risk and you may incur a profit or loss regardless of strategy selected.
The information contained herein is general in nature and does not constitute legal or tax advice. Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results. The Dow Jones Industrial Average (INDU) is the most widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials. The Dow Jones Transportation Average (DJTA, also called the "Dow Jones Transports") is a U.S. stock market index from the Dow Jones Indices of the transportation sector, and is the most widely recognized gauge of the American transportation sector. Standard & Poor's 500 (SPX) is a basket of 500 stocks that are considered to be widely held. The S&P 500 index is weighted by market value, and its performance is thought to be representative of the stock market as a whole. The NASDAQ Composite Index (COMP.Q) is an index that indicates price movements of securities in the over-the-counter market. It includes all domestic common stocks in the NASDAQ System (approximately 5,000 stocks) and is weighted according to the market value of each listed issue. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks.
Dividends are not guaranteed and must be authorized by the company's board of directors.
Diversification does not ensure a profit or guarantee against a loss.
Investing in oil involves special risks, including the potential adverse effects of state and federal regulation and may not be suitable for all investors.
International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility.
The companies engaged in the communications and technology industries are subject to fierce competition and their products and services may be subject to rapid obsolescence.
Gold is subject to the special risks associated with investing in precious metals, including but not limited to: price may be subject to wide fluctuation; the market is relatively limited; the sources are concentrated in countries that have the potential for instability; and the market is unregulated.
The information contained within this commercial email has been obtained from sources considered reliable, but we do not guarantee the foregoing material is accurate or complete.
Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
Charts are reprinted with permission, further reproduction is strictly prohibited.
If you would like to be removed from this e-Mail Alert Notification, PLEASE click the Reply button, type "remove" or "unsubscribe" in the subject line and include your name in the message, then click Send.
