Stocks are set to enter the final month of 2024 near record highs as investors look to end what has been another great year for US stocks.
During last week’s truncated trading, the Dow Jones Industrial Average (^DJI) rose more than 2%. Meanwhile, the Nasdaq Composite (^IXIC) and S&P 500 (^GSPC) rose more than 1%. Both the S&P 500 and the Dow Jones ended November at record highs.
A crucial set of labor market data will hit investors in the coming week, with Friday morning’s jobs report from the Bureau of Labor Statistics set to be the biggest news of the week. Updates on vacancies and private wage growth, as well as figures on activity in the services and manufacturing sectors, will also be distributed by the scheme.
Investors will look to this week’s economic data for clarity on the Federal Reserve’s next move on interest rates, which will be announced on December 18.
In company news, earnings from Salesforce ( CRM ), Okta ( OKTA ) and Lululemon ( LULU ) will highlight next week’s schedule.
Expectations for future interest rate cuts by the Federal Reserve have shifted in recent months.
On Friday, markets were pricing in a 66% chance that the Fed would cut rates at its final meeting of the year on Dec. 18, according to the CME FedWatch Tool. But looking further, markets are pricing in only two more rate cuts in the coming year, increasing concerns about the Fed’s progress in reducing inflation.
A labor market that continues to slow, but not dramatically, is also likely to keep the Fed focused on inflation, making a less compelling case for aggressive rate cuts in 2025. An update on that story will come in the November jobs report, due out soon. at 8:30 a.m. ET on Friday.
Economists expect the report to show a reversal from October’s dismal employment report, which many thought was hit hard by hurricanes and worker strikes.
From the November report, the U.S. labor market is expected to have added 200,000 jobs this month, up from 12,000 monthly job additions in October. Meanwhile, the unemployment rate is expected to have risen from 4.1% to 4.2%.
“With monthly fluctuations in nonfarm payrolls, we expect the November employment report to reiterate that while the labor market remains solid in absolute terms, the softening trend in working conditions has not stopped,” says the Wells Fargo Economics team led by Jay Bryson. wrote in a note to customers. “That message will likely come across more clearly from the unemployment rate, which is expected to rise to 4.2%.”
Wall Street strategists have been largely bullish in issuing their 2025 forecasts, with strategists tracked by Yahoo Finance seeing the S&P 500 ending the year between 6,400 and 7,000. A frequent call in this outlook has been a continued broadening of the stock market rally away from the ‘Magnificent Seven’ tech stocks – Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla (TSLA) and Nvidia (NVDA) – and towards the other 493 stocks in the index.
“We have put a head start on the broadening of market leadership or the shift to value, but believe this is a close call,” wrote Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, emphasizing that another strong year of economic growth could help support the economy. the S&P493.
But not everyone agrees. Barclays head of US equity strategy Venu Krishna pointed out that Big Tech continues to beat earnings expectations every quarter. And as long as this trend continues, Krishna argued, “Big Tech will likely remain as critical of an earnings per share growth driver for the S&P 500 as the group was this year.”
According to Krishna, earnings revisions for many Big Tech names remain more positive than for the rest of the S&P 500, although the easing is expected to continue throughout the year.
In a research note published on November 27, Jessica Rabe, co-founder of DataTrek, pointed out that six Big Tech companies have seen their current quarter earnings revisions flat or higher over the past 30 days. Only Microsoft and Apple have seen their earnings estimates decline more than the S&P 500’s 1.2% in that time frame.
Meanwhile, the S&P 500’s 10 largest non-tech companies have seen their earnings expectations fall by an average of 2.7%.
“U.S. Big Tech names have solid earnings expectations and are much better off than the S&P as a whole and the top 10 non-tech holdings,” Rabe wrote. “Fortunately, Big Tech makes up a third of the S&P, so their fundamentals have an outsized impact on the index.”
Another popular call among strategists was that the roaring bull market would continue through the end of the year, with more record highs to come before trading ends in 2024.
And history supports that argument.
Ryan Detrick, chief market strategist for Carson Group, reminds us that strength in markets often breeds strength. The benchmark index dates back to 1985, when the S&P 500 rallied more than 20% in December, and has continued to rise nine times out of ten. The index has risen every December since 2000, following a rally of this magnitude during the first eleven months of the year.
“History says a chase through the end of the year is entirely possible,” Detrick wrote in a research note.
Weekly calendar
Monday
Economic data: S&P Global US manufacturing PMI, November final (48.8 expected, 48.8 prior); Construction spending month-on-month, October (0.2% expected, +0.1% prior); ISM Manufacturing, November (47.6 expected, 46.5 prior); ISM prices paid, November (54.8 expected);
Income: Zscaler (ZS)
Tuesday:
Economic data: Vacancies, October (7.51 million expected, 7.44 million previously);
Income: Box (BOX), Marvell (MRVL), Okta (OKTA), Pure Storage (PSTG), Salesforce (CRM)
Wednesday
Economic data: MBA mortgage applications, week ending November 29 (+6.3% previously); ADP Private Payrolls, November (+165,000 expected, +233,000 earlier); S&P Global US Services PMI, November final (57 earlier), S&P Global US Composite PMI, November final (55.3 earlier); ISM Services Index, November (55.5 expected, 56 earlier); ISM Services Prices Paid, November (58.1 previously); Factory orders, October (0.3% expected, -0.5% earlier); Durable goods orders, final in October (+0.2% earlier)
Income: American Eagle Outfitters (AEO), Campbell’s (CPB), ChargePoint (CHPT), Chewy (CHWY), Cracker Barrel (CBRL), Dollar Tree (DLTR), Five Below (FIVE), Foot Locker (FL), Hormel Foods (HRL) ) ), RBC (RBC), Victoria’s Secret (VSCO)
Thursday
Economic data: Job cuts at Challenger, year-on-year, November (+50.9% previously); Initial unemployment claims, week ending November 30 (previously 213,000)
Income: BMO (BMO), Build-a-Bear Workshop (BBW), Dollar General (DG), DocuSign (DOCU), Hewlett Packard Enterprise (HPE), Kroger (KR), Lululemon (LULU), Petco (WOOF), TD Bank (TD), Ulta Beauty (ULTA)
Friday
Economic calendar: Nonfarm Payrolls, November (+200,000 expected, +12,000 prior); Unemployment rate, November (4.2% expected, 4.1% earlier); Average hourly wage, month-on-month, November (+0.3% expected, +0.4% prior); Average hourly wage, year-over-year, November (+3.9% expected, +4% prior); Average hours worked per week, November (34.3 expected, 34.3 previously); Labor force participation rate, November (62.6% previously)
Income: BRP (DOOO)
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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