Market Updates
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Categories:
Key areas of focus
- Because data couldn’t be collected during the shutdown, the government hasn’t released October’s unemployment rate, CPI, or a Q3 GDP estimate. As agencies catch up, markets will take in a mix of new and delayed reports this week, including November PMIs, JOLTS, ADP employment, and consumer sentiment, alongside September catch-up data such as Industrial Production, PCE, and Factory Orders.
- Third-quarter earnings season concluded last week, and the tone remained constructive. According to FactSet, S&P 500 blended revenue growth reached 8.4%, the strongest since Q3 2022. However, the “Magnificent 7” slowed meaningfully, delivering their weakest earnings growth since Q1 2023, suggesting that while mega-caps cooled, the broader earnings backdrop stayed resilient.
- The Fed looks increasingly likely to cut rates again at the December meeting. While expectations softened earlier in November, the latest labor and sentiment readings now have bond markets showing a better-than an 80% chance of a cut, reflecting growing conviction that policy easing is back on the table
Week in review
Equities staged a strong rally last week despite a shortened schedule around Thanksgiving. With the government now reopened, investors had to sift through a cluster of delayed data after weeks of unusually quiet releases. Monday kicked things off with no major reports, but stocks still rallied as confidence in a December Fed cut continued to gain momentum. By Tuesday, the floodgates opened as delayed September data was finally released. While the numbers were dated, they mostly pointed to softer activity with slowing retail sales, mild producer inflation, and flat home prices. More current indicators weren’t much better, with consumer confidence falling sharply and the Richmond Fed’s manufacturing index weakening further. Wednesday brought another wave of catch-up reports, including slightly better-than-expected jobless claims numbers and a 0.5% increase in durable goods orders, with August numbers revised higher. After closing for Thanksgiving, markets reopened Friday to a shortened trading session and modest gains, but no new major data releases.
Spotlight
Investor sentiment around the next Fed cut has been all over the place. Investors began November expecting another rate cut in December following the cut earlier this fall, but confidence faded as the month went on. That was until the delayed September jobs report revived expectations for another 25 bps move. New York Fed President (and FOMC Vice Chair) Williams also leaned into that view, noting cooling labor markets and easing inflation risks as reasons for “a further adjustment in the near term.” With the next payrolls report not coming until December 16 and CPI on December 18, there’s not much on the calendar that could get in the way of a cut for the December 9–10 meeting. Markets quickly priced in that information, with odds of a cut jumping from ~39% on 11/20 to ~87% by 11/27. Yields moved too, with the 10-year falling from 4.13% on 11/19 to 4.00% on 11/26. As monetary-policy tail risks eased, volatility retreated. The VIX dropped back below 16 after a spike near 30 last week, and equities responded with a strong week as the S&P 500 finished up more than 3.7%.
Markets
Sectors
Style & Market Cap
Sources
- FactSet Earnings
FactSet Earnings Insight, retrieved from FactSet, https://insight.factset.com/topic/earnings2. - CME FedWatch Tool
CME Group, FedWatch, retrieved from CME Group; https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html - Retail Sales
United States Census Bureau, Advance Monthly Sales for Retail and Food Services, retrieved from U.S. Census, https://www.census.gov/retail/sales.html - Producer Price Index (PPI)
U.S. Bureau of Labor Statistics, Producer Price Index News Release Summary, retrieved from U.S. Bureau of Labor Statistics; https://www.bls.gov/news.release/ppi.nr0.htm - Home Prices
U.S. Federal Housing Finance Agency, FHFA House Price Index, retrieved from U.S. Federal Housing; https://www.fhfa.gov/data/hpi - Consumer Confidence
The Conference Board, US Consumer Confidence, retrieved from The Conference Board; https://www.conference-board.org/topics/consumer-confidence/ - Richmond Fed Manufacturing Index
Federal Reserve Bank of Richmond, Manufacturing Survey, retrieved from the Richmond Fed; https://www.richmondfed.org/region_communities/regional_data_analysis/business_surveys/manufacturing?from=/region_communities/regional_data_analysis/surveys/manufacturing - Jobless Claims
U.S. Department of Labor, Unemployment Insurance Weekly Claims, retrieved from U.S. Department of Labor; https://www.dol.gov/ui/data.pdf - Durable Goods Orders
United States Census Bureau, Monthly Advance Report on Durable Goods Manufacturers' Shipments Inventories and Orders, retrieved from U.S. Census, https://www.census.gov/manufacturing/m3/adv/current/index.html
Market Data
Morningstar Direct using Morningstar Indices
Authors:
Anthony Silva
CFA®
Senior Director of Strategy Management
World Investment Advisors, LLC