Market Commentary
The post-election rally hit a pause to open the week as megacap technology shares were laggards. However, looking across the average stock we are seeing gains. Bond markets are closed today, however, they continue to see headwinds as yields climb after Trump’s victory.
With the election behind us and a 25 bps rate cut now in the rearview mirror, investors are closely watching to see if the recent re-risking in the market has staying power. The S&P 500 is hovering near the 6,000 mark, buoyed by improving market breadth, post-election certainty, and strong corporate earnings. While valuations remain stretched—a less reliable indicator for short-term market timing—they have yet to reach their peak. However, with yields continuing to rise, risk assets may face increasing challenges in sustaining their recent momentum.
This week brings key updates on inflation with the release of the Consumer Price Index (CPI) and Producer Price Index (PPI). Expectations for CPI point to a 0.2% month-over-month increase and a 2.6% year-over-year rise, up from last month’s 2.4%. If inflation surprises to the upside, we could see long-term rates climb higher, adding further restriction to the economy. With the Fed’s recent 25 bps rate cut and inflation potentially running above the 2% target, how policymakers respond to this data at their December meeting will be critical. While another 25 bps cut remains likely, a hotter inflation reading could prompt more hawkish messaging, signaling a potential pause into early 2025.
As the Q3 earnings season nears its close, the S&P 500 is on track for its fifth consecutive quarter of year-over-year earnings growth. Over 90% of companies have reported and 75% are surpassing earnings expectations. So while growth in the economy is slowing, there are no significant signs of earnings instability at this point.
Our Newton model reflects the short-term strength in domestic equity market indexes post-election. Foreign markets are having a rough week of trading as they are poor relative to their domestic counterparts. Within sectors, we are seeing risk-on back in vogue in place of more defensive sectors like Consumer Defensive and Utilities.
Economic Releases This Week
Monday: None. Bond Market Closed.
Tuesday: NFIB Optimism Index, Richmond & Philadelphia Fed President’s Speak
Wednesday: Consumer Price Index (CPI), Dallas, New York, St. Louis, Kansas City Fed President’s Speak
Thursday: Initial Jobless Claims, Producer Price Index (PPI), Federal Reserve Chair Powell Speaks
Friday: US Retail Sales, Import Price Index
Stories to Start the Week
President-elect Donald Trump won Arizona, the last state to be called in the 2024 Presidential Election.
Chipotle named interim boss Scott Boatwright as permanent CEO, months after Brian Niccol exited the role to take the top job at Starbucks.
A team of developers is launching a $2 billion development at the largest marina in Fort Lauderdale, aiming to create a “mini Monaco”.
What is Newton?
Our Newton model attempts to determine the highest probability of future price direction by using advanced algorithmic and high-order mathematical techniques on the current market environment to identify trends in underlying security prices. The Newton model scores securities over multiple time periods on a scale of 0-20 with 0 being the worst and 20 being the best possible score.
Trend & level both matter. For example, a name that moves from an 18 to a 16 would signal a strong level yet slight exhaustion in the trend.
Technical trading models are mathematically driven based upon historical data and trends of domestic and foreign market trading activity, including various industry and sector trading statistics within such markets. Technical trading models, through mathematical algorithms, attempt to identify when markets are likely to increase or decrease and identify appropriate entry and exit points. The primary risk of technical trading models is that historical trends and past performance cannot predict future trends and there is no assurance that the mathematical algorithms employed are designed properly, updated with new data, and can accurately predict future market, industry and sector performance.