A tech rally pushed the major indexes to new highs last week as the latest economic data releases did little to shake investor confidence that the Federal Reserve will cut rates at its final meeting of 2024.
In the first week of December, the Dow Jones Industrial Average (^DJI) was the only index in the red, down about 0.5%. Meanwhile, the Nasdaq Composite (^IXIC) rose more than 3% and the S&P 500 (^GSPC) rose almost 1%.
Next week, a crucial inflation measure, the Consumer Price Index (CPI), will be published on Wednesday. A lecture on wholesale inflation, the Producer Price Index (PPI), will follow on Thursday.
In business news, quarterly results from Broadcom (AVGO), Costco (COST), C3.ai (AI) and GameStop (GME) will highlight a quiet week of planned business updates.
Bureau of Labor Statistics data released Friday showed 227,000 new jobs were created in November, just above the 220,000 economists expected. The unemployment rate rose to 4.2%. Overall, the release didn’t change economists’ and investors’ minds that the labor market is cooling, but not at a pace that would change the Fed’s rate-cutting trajectory.
“The Fed should be in a position to move forward with the December rate cut, but next week’s CPI report now becomes another key milestone in the policy adjustment calculus,” BlackRock Chief Investment Officer of Global Fixed Income Rick Rieder wrote on Friday .
“Next week’s CPI and PPI price data will be the key determinant of the Fed’s interest rate decision this month,” said Stephen Brown, deputy chief economist for North America at Capital Economics.
On Friday, markets were pricing in a roughly 85% chance that the Fed would cut rates by a quarter of a percentage point on Dec. 18, according to the CME FedWatch Tool.
The final CPI release ahead of the Fed’s meeting is expected to be out at 8:30 a.m. (ET) on Wednesday. Wall Street economists expect headline inflation to rise 2.7% annually in November, up from 2.6% in October. Economists forecast prices will rise 0.3% month-on-month, above the 0.2% month-on-month increase in September.
On a core basis, which excludes food and energy prices, the CPI is expected to have risen 3.3% in November compared to last year. This would be the fourth month in a row with a core CPI of 3.3%. Monthly core price increases are expected to reach 0.3%, also in line with October gains.
“The disinflationary momentum is fading, and new headwinds have emerged (e.g. the potential for tariffs and tax cuts) that make the final stretch of inflation back to the Fed’s 2% target looking increasingly difficult” , the Wells Fargo Economics team led by Jay Bryson wrote in a weekly note. “The persistent picture of inflation that has emerged in recent months is unlikely to be changed by the November CPI report.”
Markets rose last week, in a similar manner to what they have seen since President-elect Donald Trump won the nomination on November 6.
U.S. equity strategist Scott Chronert of Citi, who sees the S&P 500 ending the year at 6,100, noted that market action has been “more of the same” and that “enthusiasm for a market-friendly Trump administration is still at work after the election.” is’.
This is characterized by significantly low market volatility. The CBOE Volatility Index, known simply as the VIX (^VIX), is hovering around 13, its lowest level since before the market plunge in early August.
Currently, Chronert sees one clear risk event on December 18 that could hold back the rally through the end of the year.
“The December Fed meeting appears to be the remaining hurdle to price action through the end of the year,” Chronert said.
And concerns raised by hawkish Jerome Powell at the Fed’s last meeting of 2024 could grow next week if November inflation numbers are worse than expected.
“The inflation numbers are definitely something,” John Koudounis, CEO of Calamos Investments, told Yahoo Finance when asked what risks he is concerned about through the end of the year. “If they’re really not confused, that will be something people will look into.”
The Magnificent Seven technology stocks rose last week. All seven stocks – Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla (TSLA) and Nvidia (NVDA) – all handily outperformed the S&P 500. , Amazon and Apple all closed at record highs on Friday. Roundhill’s Magnificent Seven ETF (MAGS), which tracks all seven stocks, also closed at an all-time high.
The rise in Big Tech comes as many Wall Street strategists have called for a broadening of stock market performance in 2025. But as we noted last week, the near-term fundamental story favors the Magnificent Seven, where earnings expectations are decreased. largely held up better than the rest of the market.
This trend still leaves some investors optimistic about the larger tech cohort heading into next year.
“If you compare the relative price trends of technology to the relative earnings trends, they go hand-in-hand,” Keith Lerner, co-chief investment officer of Trust, told Yahoo Finance.
Lerner added that the tech sector itself, over three years, outperforms the S&P 500 by 33%, a far cry from the 252% outperformance at the height of the dot-com bubble. This means tech stocks, and the bull market in general, could have more room to run.
“Every bull market usually has a theme,” Lerner said. “And if you believe the bull market is intact, which we do, then that theme will probably continue until the end of the bull market. And if the bull market tops out, that probably means we’re at the top of the bull market.”
Economic data: Wholesale inventories, month-over-month, October final (0.2% earlier); New York Fed one-year inflation expectations, November (2.87% earlier)
Income: Casey’s (CASY), C3.ai (AI), MongoDB (MDB), Rent the Runway (RENT), Oracle (ORCL), Toll Brothers (TOL), Vail Resorts (MTN)
Economic data: NFIB Small Business Optimism, November (94.1 expected, 93.7 prior); Non-farm productivity, third quarter final (2.2% expected, 2.2% earlier); Unit labor costs, third quarter final, (1.4% expected, 1.9% earlier)
Income: AutoZone (AZO), Academy Sports and Outdoors (ASO), Dave & Buster’s (PLAY), GameStop (GME), Stitch Fix (SFIX),
Wednesday
Economic data: MBA mortgage applications, week ending December 6 (+2.8% prior); Consumer Price Index, month-on-month, November (+0.3% expected, +0.2% prior); Core CPI, month-on-month, November (+0.3% expected, +0.3% prior); CPI, year-on-year, November (+2.7% expected, +2.6% prior); Core CPI, year-on-year, November (+3.3% expected, +3.3% prior); Real average hourly wage, year-on-year, November (+1.4% previously)
Income: Adobe (ADBE), Macy’s (M), Vera Bradley (VRA)
Economic data: Initial unemployment claims, week ending December 7 (224,000 previously); Producer Price Index, month-on-month, November (+0.3% expected, 0.2% earlier); PPI, year-on-year, November (+2.4% previously)
Income: Broadcom (AVGO), Costco (COST), Lovesac (LOVE)
Economic data: import prices, month-on-month, November (-0.3% expected, +0.3% earlier); Export prices, month-on-month, November (-0.3% expected, +0.8% earlier)
Income: No significant merits.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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