Financial Update: Week of December 9, 2024
Major U.S. equity indexes traded mixed, yet mostly higher last week courtesy of a “just right” monthly employment report, with tech leading the way throughout December’s first week of trading.
By last Friday’s close, here was the weekly tale of the tape: the S&P 500 tacked on 0.96%, the Nasdaq 100 rose by 3.31%, and the Dow Jones Industrial Average finished the week lower by 0.60%.
S&P 500 Record Weekly Closing High
Once again, the broadest measure of the U.S. economy, the S&P 500, closed on Friday at its highest weekly closing level of 2024, marking its third consecutive week of gains.
A good portion of equity market gains last week were centered around tech, while the recent trend of industrials leading the way took a breather. The technology sector has delivered robust earnings reports, boosting investor tech sentiment last week.
Counterbalancing the tech sector optimism was some sluggishness across industrials, energy, and utilities last week — perhaps with potential tariffs on the collective minds of investors. The Dow Jones Industrial Average has performed well compared to other major U.S. equity indexes recently, and a pullback can not be too surprising.
Noteworthily, NVIDIA Corp ($NVDA) replaced Intel Corp ($INTC) in the 30-stock Dow Jones Industrial Average in November. So, NVIDIA in, and Intel out. In addition, recent developments at Intel brought a CEO departure. The once-dominating semiconductor player has seen better days.
Meanwhile, gains in Tesla Inc. ($TSLA), Meta Platforms, Inc. ($META), and Amazon.com Inc. ($AMZN) were on display during last week’s tech rally.
Overall, equity market bulls were on parade yet again, even as they were primarily waiting for Friday’s big jobs number. The November jobs number did not disappoint!
Smooth Jobs Report Favors Rate Cut
Market participants wanted to see a “just right” number heading into the big jobs number last week — and they got their wish!
Jobs data for November implied somewhat of a “Goldilocks” scenario, with November nonfarm payroll data showing a gain of 227,000 jobs versus the Dow Jones consensus estimate of 214,000. Adding to the optimistic November data, October jobs were revised upwardly by 36,000 after a very weak showing last month.
The data was interpreted as ”just right.” Not too hot and not too cold — somewhat perfect news for Fed rate cut bulls.
Recently created employment opportunities have been seen in the healthcare, social assistance, and leisure/hospitality fields, with all posting big gains.
Many folks are enthusiastic about the present labor market picture, showing signs of the economy experiencing growth but not overheating. This helps to keep the Fed’s pathway open to future rate cuts for the time being.
The U.S. unemployment rate ticked up to 4.2%, in line with expectations.
Labor Data Market Reaction: Rate Cut Odds Rise
Markets reacted positively to the monthly labor market data, and the S&P 500 and Nasdaq traded to the upside as a result last Friday, both reaching record highs.
As tech led the way last week, attention turned to December rate cut probabilities heading into Friday’s job number.
Heading into the key economic data drop of last week, probabilities of a rate cut at the December 18th meeting stood at less than 70%. Well, that shifted dramatically after the labor market data release, with implied probabilities spiking to 86% as of last Friday’s close.
The fresh labor market data gives rate-cut bulls more reason for cheer heading into the week before the December 18th Fed meeting.
Treasury Yields Lower, Quiet
Speaking of the Fed, last week was quiet for Treasury yields, with the benchmark 10-year note yield dropping by around 2.7 basis points to finish the week near 4.15%.
2-year note yields were also on the quiet side and finished the week slightly lower, by around 5.7 basis points to close the week near 4.106%.
So, the 2/10 yield curve has thus far maintained its recently reacquired normalcy or “uninversion,” with the 10-year yield higher than the 2-year yield by around 4.4 basis points as of last week’s market close.
For now, calm yields are more than welcome for U.S. stocks as markets look to the December 18th Fed meeting. Let’s see how this week’s Consumer Price Index (CPI) data affects bond yields and rate-cut probabilities over this week.
Inflation Data on Tap
With the big November jobs report out of the way, attention will turn to CPI data on Wednesday morning, followed by the Wholesale inflation (PPI) data on Thursday. The monthly consumer price index for November comes after four consecutive months of 0.2% month-over-month increases.
The monthly Consumer Price Index data has been trending lower since peaking in June 2022, when year-over-year consumer price increases ran at 9.1%. We have come a long way, but the recent four-month trend of higher ticks is on the minds of many.
Staying Grounded
Investors have been enjoying quite a run in several asset classes lately, and it is the perfect time to remind ourselves about staying grounded. Mastery of the long-term investing mentality features discipline and the same emotional mindset during all phases of market cycles.
That is why investing over time, instead of market timing, has been the secret sauce of long-term investors for decades and centuries.
Recently, we have observed appreciating prices in many risk assets on the higher-risk end of the spectrum, such as cryptocurrencies and meme stocks. Some are comparing it to the pandemic-era boom in some assets.
And that is ok! Many assets have a place in many investor portfolios. We just use discipline and time to our advantage to avoid overconcentration into any single individual asset or sector.
Putting It Together
Life can move fast; so can the financial markets. It has been a remarkable rally across several financial markets heading into and continuing after the presidential election.
Where have all the bears gone? It is fair to say that few people anticipated the magnitude of the stock market rally in November, which has continued into the beginning of December. As long-term investors, we welcome this rise in market sentiment! Adhering to our plan and strategy is the discipline that drives our success.
Expectations for another 25-basis-point Fed rate cut at the December meeting are real and approached 86% probability as of last week’s market close. Folks will be tuned into CPI this week, as a softer-than-expected print could help top seal Fed rate cut expectations, while a higher-than-expected print could throw some uncertainty into the mix.
With that said, how are things going for you? If recent market developments have you considering a strategy shift or allocation of new investment capital, please let me know, and we can connect to discuss the strategy.
In the meantime, enjoy the holiday season. I am always here when you need me!
Disclosure:
This material provided by Levitate. Levitate is not affiliated with Valmark Securities, Inc. and Valmark Advisers, Inc. Indices are unmanaged and do not incur fees, one cannot directly invest in an index. Diversification does not guarantee investment returns and does not eliminate the risk of loss. Past performance does not guarantee future results. The information provided has been derived from sources believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete analysis of the material discussed, nor does is constitute an offer or a solicitation of an offer to buy any securities, products or services mentioned.
Disclosure:
This material provided by Levitate. Levitate is not affiliated with Valmark Securities, Inc. and Valmark Advisers, Inc. Indices are unmanaged and do not incur fees, one cannot directly invest in an index. Diversification does not guarantee investment returns and does not eliminate the risk of loss. Past performance does not guarantee future results. The information provided has been derived from sources believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete analysis of the material discussed, nor does is constitute an offer or a solicitation of an offer to buy any securities, products or services mentioned.