During Thanksgiving week, everyone had something to be thankful for. The stock market went up, interest rates stayed the same, and the prices of gasoline and oil went down. People also went shopping.
It won’t be clear how much they spent over the weekend until early in the week when data gathered from stores over the weekend is released by Visa (V) – Get Free Report and Mastercard (MA) – Get Free Report. However, anecdotal evidence points to vigorous but not feverish activity.
Before Thanksgiving, retailers who were interviewed said that consumers are, at best, picky and might be buying gifts from inexpensive stores.
But the closer one comes to Christmas, the faster that might change.
Nevertheless, investors appear to be positioning themselves for a continuation of the early November gain this coming week. And following a mid-summer correction, December—typically one of the best months of the year—remains ahead of schedule.
Thanksgiving week, which was cut short due to the holiday, had stronger stock finishes overall. The S&P 500 (^IN) increased by precisely 1% to 4,959. At 35,390, the Dow Jones Industrial Average (DJI) increased by a stronger 1.2%. At 14,251, the Nasdaq Composite Index (COMPX) increased by about 1%.
It’s safe to say that November has been the best month of the year and the best month since mid-2022.
With four trading days remaining, the S&P 500 is up 8.7% for the month and up over 19% for the year—a significant recovery from the 2022 low. The Nasdaq has increased by 36% this year and by almost 11% this month. The Dow is not doing well; it is up 7% this month and almost 7% this year.
A plethora of concerns plagued investors, which included:
higher rates of interest.
Inflation worries.
Fears of a recession (caused by points 1 and 2).
Fears that conflicts between Hamas and Israel, as well as between Ukraine and Russia, may turn violent.
However, as the inflation data got better, interest rates decreased. The 10-year Treasury yield, which influences everything from auto loans to mortgage rates, was momentarily above 5% in mid-October, but it is currently at 4.47%.
Every hailstorm plummeting inflation
In the summer of 2021, inflation—as indicated by the Consumer Price Index—soared above 8% annually. When it dropped to 3.2% on an annualized basis by October 2023, the Federal Reserve maintained its benchmark interest rate at 5.5% to 5.25%.
The recent reduction in the price of fuel and oil is a major contributing factor to the decline in inflation. Crude oil has dropped 6.2% in November alone, and 16.8% so far this quarter. At $3.259 a gallon on Saturday, AAA’s national average fuel price is 16% lower than its peak on September 18.
After the enthusiastic reception to the CPI report on November 14, equities have been steadily rising.
Since the report’s release the day prior, the S&P 500 has increased by 3.35%. Real estate, materials (including steel and other metals), utilities, and financial companies led the increase across all 11 S&P 500 sectors.
In that time, the S&P’s tech sector has only increased by 2.9%. passable but unimpressive in light of the sector’s overall performance in 2024.
With companies like Nvidia (NVDA) – Get Free Report, up 226%; Microsoft (MSFT) – Get Free Report, up 57%; Palo Alto Networks (PANW) – Get Free Report, up 90.7%; Advanced Micro Devices (AMD) – Get Free Report, up 88.8%; and Apple (AAPL) – Get Free Report, up 46.2%, it should come as no surprise that the information technology sector is up 50.4% for the year.
The December taskTheoretically, the stock market’s upswing should continue into December. Most of the components are where they should be, particularly:
Since 1999, the average December gain for the S&P 500 has been 5.1%. The average for the Nasdaq is 7.8%, while for the Dow it is 5.9%.
The Federal Reserve may begin rate cuts in the spring when it has ceased raising rates.
Surprisingly, the U.S. economy is doing better than most analysts had predicted.
Although perhaps not quite at the rate that everyone would like, energy prices appear to be declining internationally.
Having said that, there are several hazards. First, let’s address the obvious:
Tensions in geopolitics are very high. Take a look at Russia, Ukraine, Israel, and Hamas.
The business cautioned that obtaining U.S. approvals to sell its chips may take time and could affect sales, which caused Nvidia’s shares to dip back. The tensions between the United States and China are so great.
Since it’s a presidential election year, political tensions in the US will increase. Perhaps inflation will return.
Whenever it raises rates, the Fed usually indicates it won’t think twice about doing so.
The wildly fluctuating prices of many companies, particularly large tech firms, have consequently given an extremely partial image of equities in general.
Information technology, consumer discretionary, and communication services are the only three of the S&P 500’s eleven sectors that are up more than 10% so far this year. The three are really up. They also consist of Google parent Alphabet (GOOG), Microsoft, and Nvidia. – Download a free report from Facebook-parent Meta Platforms (META), Adobe (ADBE), Oracle (ORCL), and Adobe (ADBE). Netflix (NFLX) and Amazon.com (AMZN) both offer free reports.
In addition, market capitalization is used to determine the weights of the S&P 500, Nasdaq, and Nasdaq-100 indexes. An index is more influenced by a stock with a larger total market capitalization.
By market capitalization, the top ten S&P 500 stocks account for about 30% of the index’s total value.
The Dow is weighted by price. A stock has a greater influence the higher its price.
The image changes drastically if every S&P 500 stock is given the same amount of weight. This year, the S&P Equal-weighted index has increased by just 3.7%.
Thus, if the large stocks suddenly collapse, be careful. Or prepare to strike it rich.
Source: TheStreet
