The Week in Review: 12/09/24

“Knowledge speaks, but wisdom listens” – Jimi Hendrix

Good Morning,

Last week was a big week for the stock market, well at least for the “Mega Caps” … which dominated trading. Their influence was plain to see in the outperformance of the market cap-weighted S&P 500 (+1.0%) versus the equal-weighted S&P 500 (-1.3%).

Our markets were led by the likes of Apple, NVIDIA, Microsoft, Tesla, and Amazon.com.

In addition to some energy from an AI trade that was ignited by Salesforce's encouraging outlook for its Agentforce AI system for enterprises.

Stocks languished on Thursday, albeit after a run that saw the S&P 500 score 11 gains in 12 sessions and set several new record highs in the process.

The latter point notwithstanding, this was not a week accented with broad-based buying interest. The broader market took a backseat to the mega-cap trade and gave in to some consolidation activity.

There were only three S&P 500 sectors that finished higher last week. The upside for the market is that they carried a lot of weight and registered big gains.

The consumer discretionary sector (+5.9%) led the charge followed by communication services (+4.1%), and information technology (+3.4%).

The other eight sectors had a tough go of it… the consumer staples sector, which declined 0.8%, lost the least amount of ground. Otherwise, losses ranged from 1.8% (financials) to 4.6% (energy).

Similarly, while the market cap-weighted S&P 500 gained 1.0% (rounding up), the Russell 2000 declined 1.1% and the S&P Midcap 400 Index fell 1.0%.

On a brighter note, the S&P 500, and Nasdaq Composite both finished the week at record closing highs, holding their bullish disposition after a November employment report that was neither too hot nor too cold.

The U.S. economy added 227,000 jobs in the month of November, exceeding analyst expectations. September and October’s reports were also revised upwards by 32,000 and 24,000 respectively.

In effect, it was just right for the soft landing/no landing view that left the market hopeful about continued earnings growth and another rate cut at the December 17-18 FOMC meeting.

The CME FedWatch Tool now predicts a probability of 85.8% for a ¼ cut in the Fed Funds rate.

Treasuries also had another winning week. The 2-yr note yield fell six basis points last week to 4.10% while the 10-yr note yield dropped three basis points to 4.15%.

Chairman Powell spoke last week stating that “the economy is not sending any signals that we need to be in a hurry to lower rates.” If the FOMC decides to cut rates again next week, it could be the last one for a while as the economy digests the flurry of cuts and the Fed collects new data.

We will also get a better understanding of the Fed’s position and outlook next week during Chairman Powell’s speech and the release of the Summary of Economic Projections.

Earnings reports this week will be extremely light with only a few stragglers left to announce their results for the third quarter. We will hear from AutoZone, Adobe, Broadcom, and Costco.

For economic reports, this week, we will receive November’s CPI and PPI reports.

These will be the last inflation reports to feed into the Fed’s decision next week. While inflation has taken a step back from center stage, it is still an important data point for the Fed to analyze.

Have a wonderful week!!

Michael D. Hilger, CEP^®

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