Introduction
The first week of December brought a mixed performance for U.S. equities, as optimism around rate cuts and strong jobs data propelled the S&P 500 and Nasdaq Composite to record highs. However, the Dow Jones Industrial Average dipped, reflecting broader sector rotation and caution among investors.
Weekly Market Overview
S&P 500: Gained 0.25%, closing at a record 6,090.27. Nasdaq Composite: Advanced 0.81% to 19,859.77, marking its own record high. Dow Jones Industrial Average: Fell 123.19 points (-0.28%) to 44,642.52. The S&P 500 and Nasdaq posted their third consecutive week of gains, rising 0.96% and 3.34%, respectively, while the Dow slipped 0.6%.
Jobs Report Sets the Tone
November’s labor report exceeded expectations, with nonfarm payrolls increasing by 227,000 compared to the forecast of 214,000. The unemployment rate edged up to 4.2%, matching estimates, while October’s figures were revised higher.
“This jobs report shows we’re in a sweet spot — the economy remains solid, but there’s enough softening in the labor market to justify more rate cuts,” said Luke O’Neill, portfolio manager at Catalyst Funds.
The CME Group’s FedWatch Tool now reflects an 85% likelihood of a 25 basis-point rate cut at the Federal Reserve’s next meeting.
Market Reactions: Tech Outperforms, Dow Lags
The tech-heavy Nasdaq Composite benefitted from strong performances by major players like Tesla, Meta Platforms, and Amazon, which more than offset the Dow’s decline.
Tesla: Continued to rally as investors showed confidence in its EV market dominance.
Meta Platforms & Amazon: Both posted solid gains, reinforcing big tech’s role as a growth driver. Sector Highlights: Changing Consumer Trends and Growth in Gaming
Black Friday Goes Digital
Online shopping dominated this year’s Black Friday season, with online Retail Sales: Up 7.9% year-over-year. Brick-and-Mortar Sales: Declined by 0.3%. Economist Aditya Bhave noted that the shorter 2024 holiday shopping season likely concentrated spending into fewer days.
Automotive Demand Remains Resilient
A Bank of America survey found that 43% of respondents plan to buy a new vehicle in the next 12 months, signaling strong demand despite economic uncertainties.
Video Gaming Stocks Shine
The VanEck Video Gaming and eSports ETF (ESPO) rose for its 14th consecutive session, reaching an all-time high. Key contributors included: Roblox (RBLX): Surged 18% this week. AppLovin (APP): Up 22% this week and an impressive 936% year-to-date. However, analysts cautioned that the ETF’s elevated Relative Strength Index (RSI) could signal a near-term pullback.
Outlook for the S&P 500 and Economic Forecasts
HSBC’s S&P 500 Prediction: The firm expects the index to reach 6,700 by the end of 2025, driven by 9% growth in corporate earnings and easing inflation pressures.
Rate Cuts Ahead: Analysts anticipate the Federal Reserve will lower rates by another 125 basis points throughout 2024. Global Market Trends
South Korean Won
Declined 0.6% against the U.S. dollar amid political uncertainty following a proposed impeachment vote for President Yoon Suk Yeol.
UBS Equity Outlook
UBS remains bullish on U.S. equities, favoring technology, utilities, and financials for growth through 2025. Looking Ahead
Conclusion
With the Federal Reserve’s two-day meeting looming and a robust holiday shopping season underway, December is shaping up to be pivotal. Record-setting momentum in the S&P 500 and Nasdaq highlights underlying confidence, but investors remain wary of overbought conditions in certain sectors.
Stay tuned for next week’s issue, where we’ll break down the Fed’s rate decision and its implications for the holiday season and 2024.