 | AUTHOR: Jason Roque, CFP®, APMA®, AWMA® TITLE: Investment Adviser Rep – CCO TAGS: S&P 500, NASDAQ, FRB, FDX, Oil, Jobs, PCE |
The week ended in the green as the Santa Claus Rally is under way. Will he deliver for the final week of the year?
Monday S&P 500 0.45% | NASDAQ 0.62%
Markets rose to open the week, however there was not a lot to applaud. Oil prices rose (raising concerns around inflation) because of tension in the Red Sea. It has caused shipping issues for oil companies and 10-year yields rose in response to the risk. Tensions were not enough to hold equities back as we move into the ’Santa Claus’ rally.
Tuesday S&P 500 0.59% | NASDAQ 0.66%
Equities continued to rally on Tuesday. This, again, came in the face of data that would typically produce the opposite response from equities. Federal Reserve Board (FRB) member Thomas Barkin came out indicating that inflation may be more stubborn than many think. This view would imply less cuts than the market is anticipating, following a similar message from FRB member Bostic. They are attempting to quell the market enthusiasm that FRB Chair Powell caused last week.
Wednesday S&P 500 1.47% | NASDAQ 1.50%
It was a mundane Wednesday until Fedex (FDX) reported earnings that missed market estimates. It may seem odd that a single company would sway markets this much. It has to do with future shipping demands being a proxy for economic activity. They are projecting revenues below those of last year, which would signal a reversal in consumption.
Thursday S&P 500 1.01% | NASDAQ 1.26%
Markets bounced back on Thursday replacing most of the losses from Wednesday. The two-day return of the S&P 500 is 0.45%. The economic data on the day was light, however, initial and continuing jobless claims both showed a healthy job market. The revised reading of third quarter GDP came in at a lower, but robust at 4.9%.
Friday S&P 500 0.17% | NASDAQ 0.19%
Personal Consumption Expenditures (PCE), the FRB’s preferred gauge of inflation, fell to 2.6% in November. Moreover the 6-month reading sits at 1.9%. This information buoyed the markets early. They struggled to hang on to green for the day and week, but were successful in doing so, barely.
Conclusion S&P 500 0.75% | NASDAQ 1.21%
The economic data late in the week supported the thesis that rates have likely peaked and should recede next year. A thesis that supports growth on the markets. The caveat was economic weakness, as was apparent in the earnings forecasting for Fedex. The softer economic environment will help inflation but is a delicate balancing act as it also weakens consumption and GDP.
The holiday week should continue the light volume and mild gains that were seen this week to end the year. After that the first quarter holds fourth quarter earnings, inflation, job, and consumer data to drive us nuts, I mean keep us busy!
Merry Christmas and Happy New Year!
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