The Week in Review: 11/18/2024
“The distance between insanity and genius is measured only by success” – Ian Fleming
Good Morning ,
Our stock market followed the previous week's impressive surge with some consolidation activity.
The S&P 500 hit another record high on Monday, closing above 6,000 for the first time, but settled 2.1% lower last week. The index is still 1.5% higher since the election results.
Selling focused on chipmakers and mega caps, but losses were broad based.
The equal-weighted S&P 500 closed 1.7% lower than the previous Friday. Only two S&P 500 sectors closed higher last week while eight sectors suffered losses ranging from 1.1% to 5.5%.
The energy (+0.6%) and financial (+1.4%) sectors were the lone standouts in positive territory while the health care sector (-5.5%) registered the largest loss, followed by the information technology sector (-3.2%).
Health care related stocks struggled through the week and exhibited noticeable weakness on Friday after the news that President-elect Trump nominated Robert F. Kennedy, Jr., known as a vaccine skeptic, to lead the Department of Health and Human Services.
Chipmakers were also struggling through the week and exhibited noticeable weakness on Friday after fiscal Q1 guidance from Applied Materials, a leading chip equipment maker, failed to meet the market's more optimistic expectations.
The overall negative bias last week wasn't extreme compared to the previous week's surge, and stemmed from concerns over interest rates and speculation that the Fed may be more cautious with rate cuts than the market previously hoped. The 10-yr yield, which briefly reached 4.50%, settled 12 basis points higher than the previous Friday at 4.43%. The 2-yr yield settled five basis points higher the week before.
This price action was largely related to remarks by Fed Chair Powell indicating that the "economy is not sending any signals that we need to be in a hurry to lower rates."
Last week's data largely corroborated Mr. Powell's comments.
Total CPI was up 2.6% year-over-year, versus 2.4% in September, and core CPI up 3.3% year-over-year, unchanged from September.
Total PPI was up 2.4% year-over-year, versus 1.9% in September, and the index for final demand, less food and energy, was up 3.1% year-over-year, versus 3.0% in September.
Weekly jobless claims remained below recession-like levels, reflecting ongoing strength in the labor market that may translate to higher consumer spending, piling more pressure on inflation. Retail sales were solid in October and the data was stronger than headline numbers suggest due to upward revisions in the September data.
Earnings and the economy remain robust, traders just prefer the news to not be “too good” and give the Fed a reason to pause future cuts.
With 93% of S&P 500 companies reporting, the blended year-over-year growth rate is 5.4% for the quarter (source: Factset). With only a few companies left to report, it is likely that earnings growth will remain positive, marking the 5th straight quarter for the index.
The CME FedWatch Tool now forecasts a probability of 58.2% for a ¼ cut at the FOMC Meeting on December 18th, down from 65% a week ago.
There is quite a bit of economic news coming out before the FOMC Meeting, all will be watching closely.
This week will be relatively light for economic news. The highlighted reports will all be on Friday. Manufacturing PMI, Services PMI, and the University of Michigan Consumer Sentiment reports will all be released on this day.
This week we will also wrap up the third quarter’s earnings season. We will hear from Walmart, Lowe’s, NVIDIA, Target, Deere, and Intuit among others. These are important numbers regarding growth and the economy.
While the market took a step back last week, we still believe there will be positive momentum into the end of the year as investors begin to look towards 2025 opportunities.
Have a wonderful week!
Michael D. Hilger, CEP®
Managing Director
Senior Vice President, Wealth Management
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