Weekly Newsletter: November 25, 2024
“’Cause I got a peaceful easy feelin’ and I know (the markets) won’t let me down.” No matter the economic, earnings or even political events, the markets remain unfazed. The earnings highlight was Nvidia, which disappointed a bit as revenue slowed for the torrid pace of the past two years. It traded lower following earnings, but was unchanged on the week. Jobless claims still point to economic strength even as consumer sentiment and leading economic indicators weaken. Pick a political event and the markets merely yawned and pulled the covers up. Wednesday will be stuffed with economic data ahead of the Thanksgiving holiday. The Fed’s inflation report, income and spending figures along with weekly jobless claims should give investors a good workout before the Thanksgiving feast. Friday will be a very quiet day of trading as everyone will be watching the Black Friday events unfold to see if the consumer continues to spend.
The highlight of the week was not in the economic reports, but in Nvidia’s earnings. The report was generally above estimates, however the “whisper” numbers (where analysts talk under their breath about the potential good news) were even higher. The “disappointment” was enough to push the stock lower before it eventually recovered into the weekend. Why the hyperfocus on one stock? It is the largest in the SP500 and has the capability to move the index without much help from the other 499 stocks. The only bits of economic data were housing (still expensive) and various consumer sentiment readings, which were poor. The sentiment readings need to be taken with a grain of salt, as retail sales remain decent and supportive of a confident consumer.
Ever since the Fed began their rate cutting cycle, interest rates have been rising. It is counter intuitive, but it may be investors telling the Fed they are making a mistake. Commodity prices are once again rising, now up 4% from year ago levels, after being flat for much of the past six weeks. Other markers within the bond model are once again pointing to higher rates in the future. The Fed next meets in mid-December, when it was expected they would cut by a quarter point. In light of the stronger economic data, that cut may get postponed until sometime in 2025.
The markets have been slowly shifting since early July, away from the top technology stocks to more of “everything else”. Strategists have been waiting for the “broadening out” of the rally in the market. The net number of stocks rsising versus falling continues to favor those rising. The number of stocks making new highs remains above those making new lows. The “internals” of the market remains supportive of higher prices. Over the longer term, stocks remain very richly priced on a variety of measures. This means that once investors tire of stocks and begin taking profits or worry more about the economy, stocks could be in for a long decline. That day remains somewhere in the future with the market today exhibiting strength and not weakness. All that said, the near straight line run in stocks are due for at least a break of 5-10% correction that may provide the opportunity for a continuation of the bull run of the past two years.
There will be plenty of activity for investor to focus upon through mid-Wednesday, when investors are likely to head home to begin prepping for the Thanksgiving feast.
The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable but are opinions and do not constitute a guarantee of present or future financial market conditions.