Investors Hit the Pause Button on the Post-Election Rally

Performance for Week Ending 11/15/2024:

The Dow Jones Industrial Average (Dow) fell 1.24%, the Standard & Poor’s 500 Index (S&P 500) lost 2.08% and the Nasdaq Composite Index (NASDAQ) finished down 3.15%. Sector breadth was negative with 9 of the 11 S&P sector groups closing lower. The Healthcare sector (-5.54%) was the weakest performer followed by Materials (-3.07%) and Utilities (-2.81%). On the flipside, Financials (+1.42%) and Energy (+0.58%) finished higher.

*See below for Index Definitions

MARKET OBSERVATIONS: 11/11/2024  – 11/15/2024

The S&P 500 finished the week lower as the post-election rally stalled. Driving the weakness was signs the moderation in inflation has slowed and comments from Fed Chair Powell that the Fed is in no rush to reduce rates. Speaking at a conference in Dallas, Fed Chair Jay Powell said the recent performance of the US economy has been “remarkably good,” giving central bankers room to lower interest rates at a careful pace. “The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said in prepared remarks. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.” Powell’s comments seemed to echo his other Fed colleagues who have been advocating for a go-slow approach to future rate reductions. “Inflation is running much closer to our 2% longer-run goal, but it is not there yet,” Powell said. “We are committed to finishing the job. With labor-market conditions in rough balance and inflation expectations well anchored, I expect inflation to continue to come down toward our 2% objective, albeit on a sometimes-bumpy path.” Powell made no comments on the possibility of a cut at the December meeting; however, Bloomberg’s World Interest Rate Probability tool showed the odds falling to 62% from over 80% earlier in the week.

Q3 Earnings Update: While the bar was set relatively low at the start of earnings season and despite some high-profile misses, overall results have come in better than feared. Through Friday, 462 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 6.8%, with the pace of growth expected to expand to 8.5% when all companies report results. On a 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 9.7% this year followed by 12.9% in 2025.

Economic Roundup: A measure of underlying US inflation remained firm in October, underscoring the ongoing risks Federal Reserve officials face in trying to bring price pressures fully under control. The so-called core consumer price index — which excludes food and energy costs — increased 0.3% for a third month and 3.3% from a year ago. The overall CPI rose 0.2% for a fourth month and 2.6% from a year before, marking the first acceleration on an annual basis since March. Small-business optimism rose in October on brighter views for the economy in the lead-up to the election. The NFIB sentiment index rose 2.2 points to 93.7, matching the highest reading since early 2022. Applications for US unemployment benefits fell to the lowest level since May last week, signaling healthy demand for workers after recent storms and strikes. Initial claims decreased by 4K to 217K in the week ended Nov. 9. The four-week moving average of claims, a metric that helps smooth out week to week volatility, declined to 221K, the lowest level since May.

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.