Weekly Wrap

The stock market returned to its wining ways this week after taking a breather last week as investors digested post-election gains. Buy-the-dip trading contributed to the upside bias following some consolidation. The small cap Russell 2000 and S&P Mid Cap 400 benefitted from a capital rotation this week, gaining 4.5% and 4.2%, respectively. 

The S&P 500 and Nasdaq Composite each moved 1.7% higher and the Dow Jones Industrial Average settled 2.0% higher. 

Losses in some mega cap names, specifically Alphabet (GOOG), limited index performance. Shares dropped 4.2% since last Friday after news that the DOJ is pushing for a forced sale of Chrome and potentially Android. Subsequent reports indicated that Microsoft-backed and ChatGPT owner OpenAI is considering developing its own browser, which would would represent a viable competitive threat that provides GOOG with some firepower in its antitrust case.

Target (TGT) was another notable loser this week, dropping 17.8% since last Friday (and 20% during Wednesday's session) after its disappointing earnings report and outlook. Fellow retailer, and Dow component, Walmart (WMT) jumped 7.4% on the week following its earnings report. 

The headliner on the earnings calendar was NVIDIA (NVDA), which settled flat on the week. NVDA's Q3 report garnered mixed responses due to a slight deceleration in its revenue growth rate. The report was solid overall, though, and the company said demand for its Blackwell chip is "staggering."

Other story stocks included crypto-related names, which were reacting to price action in Bitcoin. The cryptocurrency reached a new high of $99,768 on Friday. 

Early in the week, geopolitical angst was piqued after reports that President Putin had lowered Russia's threshold for using nuclear weapons, that Ukraine had launched U.S.-made and UK-made missiles into Russia, and that Russian Foreign Minister Lavrov had called the attack on Russia an "escalation signal."

Treasuries settled mixed after this week's slate of economic reports. The 10-yr yield dropped two basis points to 4.41% and the 2-yr yield jumped seven basis points to 4.37%. 

The lineup this week included a stronger-than-expected Existing Home Sales report for October, another decrease in weekly jobless claims, a U.S. S&P Global Services PMI for November that showed an acceleration in services sector activity, and a Manufacturing PMI that remained in contraction in November, but at a slower pace than what was seen in October. The final reading of the University of Michigan's Consumer Sentiment for November showed a dip to 71.8 from 73.0 in the preliminary reading, but it was still above October's final reading of 70.5 .

Monday:

The S&P 500 (+0.4%), Nasdaq Composite (+0.6%), and Russell 2000 (+0.1%) closed with gains. The day started out slow, but buying picked up steam after Treasury yields moved lower.

The upside bias was also fueled by buy-the-dip interest following last week's consolidation, which saw the major indices give back some of their post-election gains. Strength in mega-cap stocks and semiconductor-related names contributed to overall index gains. However, NVIDIA (NVDA) was among the outliers, trading lower after reports from The Information suggested customers are concerned about overheating issues with its AI chips. The company is set to report earnings after Wednesday’s close.

Nine out of the 11 sectors closed higher than Friday’s close, indicating broad-based buying interest. The health care sector settled little changed from Friday, weighed down by Eli Lilly (LLY) after reports that some Republican Senators are reportedly open to Robert F. Kennedy Jr.'s nomination for Secretary of Health and Human Services.

Monday's economic data included the November NAHB Housing Market Index, which rose to 46 in November (Briefing.com consensus 43) from 43 in October.

Tuesday:

The stock market opened on a cautious note, reacting to rising geopolitical tensions. This followed reports that President Putin had lowered Russia's threshold for using nuclear weapons, that Ukraine had launched U.S.-made missiles into Russia, and that Russian Foreign Minister Lavrov had called the attack on Russia an "escalation signal."

Stocks quickly brushed off fears related to the Ukraine situation and the major equity indices settled mostly higher.

The bond market didn't show any signs of panic related to the geopolitical developments, which helped the equity market remain calm, too.

Some defense-related names benefitted from the rising tensions overseas.

Reviewing Tuesday's economic data:

• October Housing Starts 1.311 mln (Briefing.com consensus 1.340 mln); Prior was revised to 1.353 mln from 1.354 mln, October Building Permits 1.416 mln (Briefing.com consensus 1.441 mln); Prior was revised to 1.425 mln from 1.428 mln
  • The key takeaway from the report is that it included some weather impact from the hurricanes, evidenced by a 10.2% month-over-month decline in starts in the South -- the nation's largest homebuilding region -- but overall it was a generally soft report on a year-over-year basis with total starts down 4.0% and total permits down 7.7%.

Wednesday:

The stock market had a mixed showing. The major indices ultimately settled near their best levels of the session thanks to a late afternoon push higher. Many stocks participated in the afternoon improvement, which mostly occurred after the cash session concluded in the bond market.

Treasury yields initially moved lower in response to some geopolitical angst as reports indicated Ukraine had fired UK-made missiles into Russia.

Early safe-haven buying dissipated, though, after Fed Governor Bowman (FOMC voter) indicated that she would like to proceed cautiously in bringing down the policy rate and after today's $16 billion 20-yr bond auction met weak demand.

Reviewing Wednesday's economic data:

• Weekly MBA Mortgage Applications Index, which increased 1.7% with purchase applications increasing 2% and refinance applications rising 2%
• Weekly EIA crude oil inventories showed a build of 545,000 barrels

Thursday:

The session started a little shaky, but stocks quickly shifted into rally-mode as investors digested NVIDIA's (NVDA) Q3 earnings report. Shares of NVDA initially traded lower due to profit-taking activity and due to a slight deceleration in its revenue growth rate. The report was solid overall, though, and the company said demand for its Blackwell chip is "staggering."

There was a positive bias under the index surface through the entire session despite the early weakness in NVDA. Other mega caps were weak through the entire session as money rotated away from those names into other areas of the market.

The Treasury market closed with losses after a stronger-than-expected Existing Home Sales report for October (3.96 mln; Briefing.com consensus 3.90 mln), which followed another decrease in weekly jobless claims (to 213,000 form 219,000), and a disappointing Philadelphia Fed Survey (-5.5; Briefing.com consensus 7.0).

Reviewing Thursday's economic data:

• Weekly Initial Claims 213K (Briefing.com consensus 221K); Prior was revised to 219K from 217K, Weekly Continuing Claims 1.908 mln; Prior was revised to 1.872 mln from 1.873 mln
  • The key takeaway from the report is that the rising trend for continuing jobless claims connotes a softening labor market whereby it has become more challenging to find a new job after being laid off.
• November Philadelphia Fed Index -5.5 (Briefing.com consensus 7.0); Prior 10.3
• October Existing Home Sales 3.96 mln (Briefing.com consensus 3.90 mln); Prior was revised to 3.83 mln from 3.84 mln
  • The key takeaway from the report is that more inventory is becoming available, but with the ongoing increase in the median home price and mortgage rates remaining elevated, affordability constraints will persist, capping total sales potential.
• October Leading Home Sales -0.4% (Briefing.com consensus -0.3%); Prior was revised to -0.3% from -0.5%

Friday:

The stock market closed higher, building on this week's gains. Equities benefitted from continued momentum that led the major indices to close with gains ranging from 1.7% to 4.5% since last Friday. As was the case yesterday, large-cap stocks underperformed the broader market, with capital rotating into small and mid-cap stocks, along with other sectors that have trailed mega cap performance.

The market-cap weighted S&P 500 settled 0.4% higher and the equal-weighted S&P 500 closed 0.8% higher.

The consumer discretionary sector (+1.2%) exhibited strength amid earnings news from the retail space. 

Treasuries settled mixed after another batch of solid economic data. The U.S. S&P Global Services PMI for November showed an acceleration in services sector activity. Manufacturing PMI remained in contraction, but at a slower pace than what was seen in October. The final reading of the University of Michigan's Consumer Sentiment for November showed a dip to 71.8 from 73.0 in the preliminary reading, but it was still above October's final reading of 70.5.

Reviewing Friday's economic data:

• November S&P Global US Manufacturing PMI - Prelim 48.8; Prior 48.5
• November S&P Global US Services PMI - Prelim 57.0; Prior 55.0
• November Univ. of Michigan Consumer Sentiment - Final 71.8 (Briefing.com consensus 73.0); Prior 73.0
  • The key takeaway from the report is that consumer sentiment held fairly steady in the wake of the election, albeit with offsetting economic expectations that were aligned with partisan positions.