A Solid Week as Performance Broadens Out

Performance for Week Ending 11/22/2024:

The Dow Jones Industrial Average (Dow) rose 2.0%, the Standard & Poor’s 500 Index (S&P 500) gained 1.7% and the Nasdaq Composite Index (NASDAQ) added 1.7%. Sector breadth was positive with 10 of the 11 S&P sector groups closing higher. The Consumer Staples sector (+3.1%) was the best performer followed by Materials (+3%).0 and Real Estate (+2.61). On the flipside, Communication Services (-0.3%) was the sole loser.

*See below for Index Definitions

MARKET OBSERVATIONS: 11/18/2024  – 11/22/2024

The S&P 500 finished the week higher, buoyed by strong earnings reports from the retail sector showing resilient US consumer spending, a business activity report suggesting the US economy remains healthy, and growing confidence that president-elect Trump’s policies of lower taxes and lightened regulatory burdens will help boost earnings growth. The market’s performance broadened, with the small-cap Russell 2000 Index (+4.5%) and the mid-cap S&P 400 Index (+4.2%) outperforming the broader market as investors rotated into stocks that are more levered to domestic growth.

Q3 Earnings Update: With earnings season nearly wrapped up, overall results have come in better than feared. Through Friday, 477 members of the S&P 500 have released fiscal quarter results with just over 75% beating expectations. Aggregate earnings for this group are currently up 8.2%, solidly ahead of the 5% pace forecast at the start of earnings season. On the sector level, the strongest growth has come from Communication Services (+25.3%) while the weakest has been Energy (-23.9%). Full year growth rate expectations according to the Bloomberg consensus are 9.8% this year followed by 12.8% in 2025.

Fed Speak:Chicago Fed President Austan Goolsbee said he sees interest rates moving “a fair bit lower,” while expressing confidence that inflation is easing toward the central bank’s objective alongside a solid labor market. “My view is that the long arc over the last year and a half shows inflation is way down and on its way to 2%. Labor markets have cooled to something close to stable full employment,” Goolsbee said. New York Fed President John Williams said that while prices have come down in a still-solid economy, there’s still room to go for inflation to come into the Fed’s 2% target. Fed Governor Michelle Bowman said she wants to move cautiously on further interest-rate cuts because progress in reducing inflation has slowed and the labor market is evolving. Lastly, Fed Governor Lisa Cook said it will likely be appropriate for the central bank to cut interest rates toward a more neutral stance over time, citing inflation progress and a solid labor market. Cook described the risks to the Fed’s employment and inflation goals as “roughly in balance.” She said she sees the direction of interest rates as downward, but that the “magnitude and timing” of reductions will depend on incoming data, the evolving outlook, and the balance of risks.

Economic Roundup: Sales of previously owned homes rose in October by the most since earlier this year, as buyers took advantage of the previous month’s dip in mortgage rates. Contract closings increased 3.4% from September—the largest gain since February—to a 3.96 million annualized rate, according to data from the National Association of Realtors.

Meanwhile, housing starts fell to their slowest pace in three months, as hurricanes exacerbated a broader easing in construction activity. Housing starts declined 3.1% in October to a 1.31 million annualized rate. In the South, which makes up the largest share of homebuilding in the country, construction activity dropped 8.8%, as builders delayed projects in the wake of hurricanes Helene and Milton.

The National Association of Home Builders reported that builder confidence reached a seven-month high in November, fueled by rising sales expectations and optimism that a Trump administration will ease regulatory burdens. A gauge of housing market conditions climbed 3 points to 46 this month, exceeding all estimates in a Bloomberg survey of economists.

On the labor front, applications for US unemployment benefits unexpectedly fell last week to the lowest level since April, underscoring the strength of the labor market. Initial claims decreased by 6K to 213K in the week ended November 16. The four-week moving average of new applications for unemployment insurance, which smooths out volatility, fell to 217.8K—the lowest since May.

The Week Ahead: The data calendar will be relatively light during the holiday interrupted week (stock markets are closed on Thursday and will close early on Friday), with the focal point being the October personal consumption expenditures (PCE) and personal income and consumption data on Wednesday. The core PCE—the Fed’s preferred inflation barometer—will be watched closely as the decision to reduce rates at the December FOMC meeting is now seen as a close call between cutting or keeping rates steady. Other reports of interest include the Conference Board's reading on consumer confidence on Tuesday as well as durable goods orders on Wednesday. On Tuesday, the Fed's FOMC meeting minutes will also give more insight into officials' thinking ahead of the December meeting. In corporate earnings, just eight members of the S&P 500 are scheduled to report results including Dell Technologies, Hewlett Packard, and Best Buy.

The Week Ahead: Housing will be a focus of this week’s data calendar with housing starts, building permits and existing home sales all due out. Other reports of interest include the Philadelphia Fed Index, Leading Economic Indicators, and the closely watched S&P Manufacturing PMI. In corporate earnings, 13 members of the S&P 500 are scheduled to report results this week with the focal point being AI-bellwether Nvidia on Wednesday. In addition to Nvidia, a number of retailers will give an update on the state of the US consumer, including Walmart, Lowe's, Target, and TJX. It will be an active week on the Fed front with 9 speeches planned throughout the week.

— By Michael Schwager, Chief Market Strategist, Managing Director

Definitions

The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.

Wilshire 5000 Total Market Index^SM represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. The index is comprised of virtually every stock that: the firm's headquarters are based in the U.S.; the stock is actively traded on a U.S. exchange; the stock has widely available pricing information (this disqualifies bulletin board, or over-the-counter stocks). The index is market cap weighted, meaning that the firms with the highest market value account for a larger portion of the index.

Standard and Poor's 500^© Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.

This material contains opinions of the author, but not necessarily those of Guggenheim Partners, LLC or its subsidiaries. The opinions contained herein are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. No part of this material may be reproduced or referred to in any form, without express written permission of Guggenheim Partners, LLC.