Closing Stock Market Summary
The stock market had another strong showing after yesterday's rally. The Russell 2000 jumped 2.6% while the Nasdaq Composite (+0.2%), S&P 500 (+0.3%), and Dow Jones Industrial Average (+0.4%) registered more modest gains due to relative weakness in mega cap constituents.
The three major indices hit an air pocket in the early afternoon and briefly fell below yesterday's closing levels. There was no specific catalyst to account for the move, which was likely related to a lingering sense that stocks are overbought on a short-term basis.
Still, many stocks recovered from session lows. The Invesco S&P 500 Equal Weight ETF (RSP) was up only 0.8% at its low for the session, but closed with a 1.4% gain.
Six of the 11 S&P 500 sectors registered gains of at least 0.9%. The energy sector (+2.9%) saw the largest gain, rising alongside oil prices ($71.61/bbl, +2.14, +3.1%), which had been partially reacting to a weaker dollar. The U.S. Dollar Index was down 0.9% to 101.97 from a high of 104.03 yesterday. The real estate sector (+2.6%) was the next best performer.
Meanwhile, he consumer staples (-1.5%) and utilities (-1.3%) sectors saw the biggest declines.
The overall positive bias was a continuation of yesterday's post-FOMC surge. Buyers have been responding to a more dovish-looking policy/tone from the FOMC and Fed Chair Powell. As a results, expectations for a rate cuts have increased from yesterday. The fed funds futures market is now pricing in six (!) rate cuts for 2024 with the first cut coming in March.
Other central banks followed the Fed's lead and left their respective rates unchanged, too. The ECB left its corridor of key policy rates unchanged, as expected, along with the Bank of England, the Swiss National Bank and Hong Kong Monetary Authority. Notably, however, ECB President Lagarde and officials at other banks indicated that they are further away from rate cuts after Fed Chair Powell disclosed that the FOMC had began discussing rate cuts.
Volume was heavy at both the NYSE and Nasdaq due in part to some added maneuvering ahead of tomorrow's huge quarterly options and futures expiration. The increased participation was also driven by a fear of missing out on further gains in this seasonally strong period for the market.
The rally continued for the Treasury market today also. The 2-yr note yield fell six basis points today to 4.40% and the 10-yr note yield declined nine basis points to 3.93%, which acted as support for stocks.
- Nasdaq Composite: +41.0%
- S&P 500: +22.9%
- Dow Jones industrial Average: +12.4%
- S&P Midcap 400: +14.0%
- Russell 2000: +13.6%
Reviewing today's economic data:
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Weekly Initial Claims 202K (consensus 222K); Prior was revised to 221K from 220K; Weekly Continuing Claims 1.876 mln; Prior was revised to 1.856 mln from 1.861 mln
- The key takeaway from the report is that the level of initial jobless claims -- a leading indicator -- is a long way still from being associated with levels registered during a recession.
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November Retail Sales 0.3% (consensus -0.1%); Prior was revised to -0.2% from -0.1%; November Retail Sales ex-auto 0.2% (consensus 0.0%); Prior was revised to 0.0% from 0.1%
- The key takeaway from the report is that it remains supportive of a soft landing outlook, as the rebound in sales from October reflects an ongoing propensity of consumers to spend on goods.
- November Export Prices -0.9%; Prior was revised to -0.9% from -1.1%
- November Export Prices ex-ag. -1.0%; Prior -1.0%
- November Import Prices -0.4%; Prior was revised to -0.6% from -0.8%
- November Import Prices ex-oil 0.2%; Prior -0.2%
- October Business Inventories -0.1% (consensus 0.1%); Prior was revised to 0.2% from 0.4%
Looking ahead to Friday, market participants will receive the following economic data:
- 8:30 a.m. ET: December Empire State Manufacturing (consensus 3.0; prior 9.1)
- 9:15 a.m. ET: November Industrial Production (consensus 0.2%; prior -0.6%) and Capacity Utilization (Briefing.com consensus 79.1%; prior 78.9%)
- 9:45 a.m. ET: December Preliminary S&P Global US Manufacturing PMI (prior 49.4) and S&P Global US Services PMI (prior 50.8)
- 4:00 p.m. ET: October Net Long-Term TIC Flows (prior -$1.7 billion)