The Stock Market Closed Out The Month Of November With Solid Gains And Began The Month Of December On A Positive Note.
Friday's close marked a new 52-week high for the S&P 500, which brushed up against the 4,600 level at its high of the day.
Only two of the S&P 500 sectors logged a decline, communication services (-2.5%) and energy (-0.1%). The rate-sensitive real estate sector (+4.6%) saw the biggest gain, followed by materials (+2.6%), industrials (+2.1%), and financials (+2.1%).
There was likely some fear of missing out on further gains in this seasonally strong period for the market contributing to the positive action this week, but the biggest driving factors were interest rates and rethinking rate cuts in the first half of 2024.
The 2-yr note yield, which is most sensitive to changes in the fed funds rate, plunged 39 basis points this week to 4.56%. The 10-yr note yield declined 24 basis points to 4.23%.
Also, the fed funds futures market now sees a much higher probability of a rate cut in May (89.0%) compared to one week ago (47.8%), according to the CME FedWatch Tool.
Some Fed officials pushed back on the idea that rate cuts will occur in the first half of 2024, but that did not deter investors. Richmond Fed President Barkin (2024 FOMC voter), Fed Governor Bowman (FOMC voter), and Fed Chair Powell all made comments this week indicating that they believe it is premature to talk rate cuts.
Investors received a slate of economic data this week that continue to look consistent with a soft landing scenario for the economy. Notable releases included: a stronger than expected November Consumer Confidence Index, an upward revision to Q3 real GDP to 5.2% from 4.9%, a moderation in income and spending, and disinflation in the PCE Price Indexes in October, a much stronger-than-expected Chicago PMI for November, and a relatively low level of initial jobless claims.
Market participants were also digesting more earnings news that was generally met with positive responses. Some of the most notable earnings news was the better-than-expected results from software enterprise names such as Snowflake and Elastic. Dow component Salesforce was another big winner after reporting earnings.
In other news, several OPEC+ countries confirmed additional voluntary cuts to the total of 2.2 million barrels per day, beginning January 1 through the end of March 2024. WTI crude oil futures declined 1.5% this week to $74.07/bbl.
Nasdaq Composite: +0.4% for the week / +36.7% YTD
S&P 500: +9.6% for the week / +19.7% YTD
Dow Jones Industrial Average: +2.4% for the week / +9.4% YTD
S&P Midcap 400: +2.6% for the week / +8.0% YTD
Russell 2000: +3.1% for the week / +5.8% YTD