Closing Stock Market SummaryThe stock market closed out November on a decidedly upbeat note. The main indices all logged big gains today and the S&P 500 was able to break above a key technical level, its 200-day moving average at 4,050. Market participants were reacting, or possibly overreacting, to the speech from Fed Chair Powell at 1:30 p.m. ET.
In front of Mr. Powell's remarks, the main indices were meandering around their flat lines until comments from Amazon.com (AMZN 96.54, +4.12, +4.5%) CEO Andrew Jassy precipitated a modest decline. He said at the DealBook Summit that "people are very much hunting for bargains" and noting that the economy is "a lot more uncertain" than previously thought. This played into the market's concerns that the Fed is going to raise rates too much and create a hard landing for the economy.
The tone of the market changed completely, however, with the release of Mr. Powell's speech. The market predominately reacted to the following key excerpt:
"Monetary policy affects the economy and inflation with uncertain lags, and the full effects of our rapid tightening so far are yet to be felt. Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down. The time for moderating the pace of rate increases may come as soon as the December meeting."
The market rally that started mid-October was partially predicated on the notion that the Fed was apt to slow down the pace of rate hikes starting in December, which Mr. Powell's remarks corroborated. The fed funds futures market now prices in a 74.7% probability of a 50-basis point increase at the December meeting versus a 66.3% probability yesterday, according to the CME FedWatchTool.
Just about everything reversed course following the speech. Equities rallied, aided by short-covering activity, the U.S. Dollar Index fell, and buying picked up in the Treasury market. The U.S. Dollar Index was down 0.7% to 106.04. The 2-yr note yield fell nine basis points to 4.38% and the 10-yr note yield fell five basis points to 3.70%.
All 11 S&P 500 sectors closed in positive territory with gains ranging from 0.6% (energy) to 5.0% (information technology). Advancers led decliners by a greater than 6-to-1 margin at the NYSE and a greater than 3-to-1 margin at the Nasdaq.
Despite today's big rally, general growth concerns continue to fester. Market participants had a slate of economic data to digest, some of which piled onto the market's slowdown concerns.
The Chicago PMI reading for November (37.2) was particularly ugly looking, falling further into contractionary territory (i.e. sub-50 reading) than the market was expecting. China also reported weaker-than-expected Manufacturing PMI (48.0) and Non-Manufacturing PMI (46.7) readings that fell further into contraction territory.
- Dow Jones Industrial Average: -4.7% YTD
- S&P Midcap 400: -9.3% YTD
- Russell 2000: -16.0% YTD
- S&P 500: -14.4% YTD
- Nasdaq Composite: -26.7% YTD
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index fell 0.8% compared to last week with purchase applications rising 4% while refinancing applications fell 13%.
- Advanced report for international trade in goods reflected a $99.0 billion deficit in October following a revised $91.9 billion deficit in September (from $92.2 billion). The advanced report for retail inventories fell 0.2% in October after a revised 0.1% decline in September (from +0.4%). The advanced report for wholesale inventories showed a 0.8% build in October after a revised 0.6% build in September (from 0.8%).
- Q3 GDP was revised up to 2.9% from the advance estimate of 2.6%. The GDP Price Deflator was also revised up to 4.3% (Briefing.com consensus 4.1%) from the advance estimate of 4.1%.
- The key takeaway from the report is that growth was better than expected and inflation was higher than first thought.
- November Chicago PMI fell further into contractionary territory (i.e. sub-50 reading) with a reading of 37.2 in November (consensus 47.5) following a reading of 45.2 in October.
- JOLTS Job Openings totaled 10.334 million in October following a revised 10.687 million total in September (10.717 million).
- Pending home sales fell 4.6% in October ( consensus -5.2%) following a revised 8.7% decline in September (from -10.2%).
- Weekly EIA Crude Oil Inventories showed a draw of 12.58 million barrels following last week's 3.69 million barrel draw.
Big Lots (BIG), Dollar General (DG), and Kroger (KR) are some of the companies reporting earnings ahead of Thursday's open.
Market participants will receive the following economic data Thursday:
- 8:30 a.m. ET: Weekly initial jobless claims ( consensus 238,000; prior 240,000) and continuing claims (prior 1.551K)
- 8:30 a.m. ET: October Personal Income ( consensus 0.4%; prior 0.4%), Personal Spending ( consensus 0.8%; prior 0.6%), PCE Price Index ( consensus 0.4%; prior 0.3%), core PCE Price Index ( consensus 0.2%; prior 0.5%)
- 10:00 a.m. ET: November ISM Manufacturing Index (consensus 49.8%; prior 50.2%)
- 10:00 a.m. ET: October Construction Spending ( consensus -0.2%; prior +0.2%)
- 10:30 a.m. ET: Weekly EIA Natural Gas Inventories (prior -80 bcf)