The Week In Review: 12/16/24

“My dear friend, clear your mind of Can’t.” ~ Samuel Jackson

Good Morning ,

It was a mixed week last week with some very bright spots.

The Nasdaq Composite closed above 20,000 for the first-time last week, settling 0.3% higher than last week. The S&P 500 and Dow Jones Industrial Average dropped 0.6% and 1.8%, respectively.

The Russell 2000 underperformed its peers, losing 2.6%.

There were valuation concerns in play that also mixed with chatter of the market being overbought on a short-term basis and due for some consolidation. Market participants used rising interest rates as an excuse to engage in profit-taking activity.

The 10-yr yield jumped 25 basis points to 4.40% and the 2-yr yield jumped 14 basis points to 4.24%. This price action followed disappointing inflation readings and data indicating some softening in the labor market.

Wednesday's release of the November Consumer Price Index (CPI) report met expectations and reinforced the market's anticipation of an upcoming rate cut.

Total CPI moved higher on a year-over-year basis to 2.7% from 2.6% and core CPI was at 3.3%, which is still above the Fed's 2% inflation target.

Expectations for a 25-basis points rate cut at the FOMC meeting next week increased in response to the data… the CME FedWatch Tool now predicts a 97.1% chance of a ¼ pt. rate cut at the FOMC Meeting this week. This is up from 86.0% one week ago.

Thursday's release of the November Producer Price Index (PPI) report also showed rising inflation at the producer level, which conflicts with the market's view of ongoing rate cuts.

While inflation remains sticky, great progress has been made since peaking in 2022.

However, without further progress toward the Fed’s 2% target, the pace of rate cuts could be slowed or even halted in 2025. The Fed is still keenly aware of inflation in the economy and should make policy decisions which will address both aspects of its dual mandate.

The index for final demand was up 3.0% year-over-year versus 2.6% in October.

Excluding food and energy, the index for final demand was up 3.4% year-over-year (3.45% unrounded versus 3.37% in October).

Market participants also received weekly initial jobless claims, which increased to 242,000 from 225,000 and continuing claims, which increased to 1.886 million from 1.871 million.

This market punishes those who disappoint, and rewards those who impress…

Oracle declined 9.6% last week after a disappointing fiscal Q2 earnings report, missing the consensus EPS estimate compiled by FactSet, and issuing lower-than-expected guidance for fiscal Q3.

Adobe's FY25 guidance disappointed investors also while shares of Broadcom rallied 25.2% last week after solid results and pleasing guidance.

As expected, the ECB's cut its key policy rates by 25 basis points.

We will also receive this week… November’s retail sales, industrial production, manufacturing production, and Personal Consumption Expenditures (PCE) report.

Additionally, we will get a final look at the third quarter’s GDP results.

All eyes will be on the FOMC Meeting this week as we anticipate the much expected ¼ point cut.

As we prepare for Christmas, we will see the pace slow in the markets. But it is likely Santa has a few more gifts for investors in 2024.

Have a wonderful week!

Michael D. Hilger, CEP^®

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