Market Melt-Up Continues on Good News

The markets broadly rounded out the week on a very strong note with each of the three major indexes finishing up more than 1.5%. Additionally, the Russell 2000 delivered one of its strongest one-week performances of the year, ending the week up nearly 4.5%. The bullish momentum experienced across the market over the past week was largely fueled by a continuation of the post-election rally after taking a breather in the week prior. Additionally, the much anticipated Q3 earnings report from Nvidia Corp. delivered strong results and guidance. Much of the strength in the market over the past year has originated from companies that are directly connected to the A.I. Revolution, with the posterchild of course being Nvidia Corp. With Nvidia delivering on Wall St.’s strong expectations, this gave proof to investors that the A.I. Bull Market is still alive and well, which provides support for a wide section of the market. With this major earnings report in the rearview mirror, Q3 earnings season is largely over and done with, minus a few exceptions. Because of this, we can assess that Q3 earnings reporting season has gone quite well with nearly 75% of S&P 500 companies posting EPS upside beats. Now that we know Q3 earnings came in quite well, this should provide nice support for the market through year’s end. At the close on Friday, the S&P 500 is currently up 25.2% YTD, a very strong year for the market. Taking a quick look at the market internals, the NYSE Advance Decline Index rebounded this week and appears on the verge of making a new ATH. Furthermore, at the end of trading on Friday, 71.3% of S&P 500 stocks were trading above their 200-Day moving average, a reliable indicator of a confirmed long-term uptrend. These market internals suggest the state of the Bull Market is healthy. Now that many uncertainties for investors have been worked out, earnings have come in strong, market internals are healthy, and the fact that the Fed is in a ‘cutting cycle’, combining these factors together, barring any unforeseen circumstances, it is our opinion that the market will finish the year higher than where it presently sits.

Key Events to Watch this Week

October PCE Inflation Report & Q3 GDP Revision
Q3 Earnings for DELL, CRWD, Variety of Retailers
December FOMC meeting looms

Now that a few major ‘unknowns’, the election and Q3 earnings, are resolved in the eyes of the market, investors will now begin to pivot their focus to the upcoming FOMC meeting scheduled to conclude on Dec. 18^th and any incoming data that could carry influence in the Fed’s policy decision. This upcoming week we will begin to get some fresh data but the trading in U.S. markets will be shortened as markets will be closed on Thursday and only open for half of a day on Friday in observance of the Thanksgiving Holiday. Despite the short week, investors will still be tuned in for a bevy of economic reports due on Wednesday that are bound to be front-of-mind for the FOMC. The report likely to garner the most attention will be the October PCE inflation report. It has been well-communicated that this FOMC group’s preferred measure of inflation is the (Core) PCE index. The past handful of inflation reports have shown significant progress in fighting inflation, however, while the rate of inflation remains low and approaching the Fed’s target of 2.0%, some fears about another smaller wave of inflation have risen. Wednesday’s report will be important in squashing these fears and providing the Fed further evidence that inflation is still approaching their goal. Additionally, due prior to the market open on Wednesday will be the first revision to the Q3 U.S. GDP report. The initial report indicated that U.S. economy grew a rate of 2.8%. Seeing the initial report validated or even a slight revision higher would be best case in the eyes of the market. In recent weeks, some doubts have begun to creep in about whether the Fed will opt to cut rates at their December meeting. At present, the CME FedWatch Tool indicates that investors are pricing in about a 52.7% chance the Fed cuts at this meeting. So, while the bias is still in favor of a cut, the market is pretty evenly split on the decision. Should the PCE report & GDP report deliver the results the market is hoping for, expect the odds of a cut to tick up. Finally, even with most of Q3 earnings season being largely over and done with, there are a handful of significant earnings reports still outstanding that our team is watching for. On Tuesday, after the market close, both Dell Technologies Inc. & CrowdStrike Holdings, Inc. are set to report their Q3 results. Also, on Tuesday, there is a basket of well-known retailers, including Best Buy Co., Inc., and Dick’s Sporting Goods Inc., that are on deck to report their third quarter results. Our team will be looking for these reports to see how the companies report and how the share prices behave in the aftermath. Have a great Thanksgiving everyone!!

Thank you for reading this week’s edition of the Weekly Market Periscope Newsletter, I hope you enjoyed it. Please lookout out for the next edition of the newsletter as we will give you a preview of the upcoming week’s important market events.

Thanks,