3 Things… 

1. Equity Trends: S&P500 closed just above 4000 with its 200-day as resistance, trend continues to be DOWN and about 0.78% below its 200-day MA; the NASDAQ is trading at last Thursday’s (Nov 10) levels and is about 7.18% below its 200-day MA, strong DOWN trend remains intact; Dow now STRONG UP trend 5.76% above its 200-day MA and holding the 34,347 level also above the previous rally high of 34,152 established on Aug 16. About 90% of the S&P 500 and 52% of the NASDAQ, and 97% of the Dow, respectively, are above their 50-Days; Bulls29:Bears40; VIX +0.74% [1]
2. Bonds: 10Y 3.88%; 2Y 4.42%; 30Y 3.74%; 3-Mo 4.41% [2]
3. Sectors: Best 3-month sectors: Energy (+10.80%); Healthcare (+5.16%); Financials (+4.63%); Crypto/Bitcoin -0.41% (16,521); [3]

This Week’s Quotable

“It’s all about the labor report. We know this is what the Fed is really focused on. So,  obviously it’s going to be a big part of their thought process – how the labor market is doing and whether we’re seeing that loosening that they want to see. The euphemism for loosening is higher unemployment.” Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research, as reported by CNBC Friday. [4]

Recent Highlights

• New Home Sales increased 7.5% (11/23)
• Crude Inventories decreased by 3.7 million bpd (11/23)
• Initial Claims increased to 240,000 (11/23)
• Durable Orders increased 1% (11/23)

In the Markets

Wall Street ended higher for the second-straight session on Wednesday as the minutes from the Fed’s policy meeting showed that the policymakers are expecting to hand out smaller rate hikes in the coming months as inflation shows signs of cooling off. All three major indexes ended in positive territory. U.S. stock markets were closed on Thursday for the Thanksgiving holiday.

How Did the Benchmarks Perform?

The Dow Jones Industrial Average (DJI) rose 0.3% or 95.96 points to close at 34,194.06 points.

The S&P 500 climbed 0.6% or 23.68 points to finish at 4,027.26 points. Consumer discretionary, communication services and utilities stocks were the biggest gainers.

The Consumer Discretionary Select Sector SPDR (XLY) rose 1.4%, while the Communication Services Select Sector SPDR (XLC) gained 1.3%. The Utilities Select Sector SPDR (XLU) added 1.1%. Ten of the 11 sectors of the benchmark index ended in positive territory.

The tech-heavy Nasdaq gained 1% or 110.91 points to end at 11,285.32 points.

The fear-gauge CBOE Volatility Index (VIX) was down 4.42% to 20.35. Advancers outnumbered decliners on the NYSE by a 1.97-to-1 ratio. On Nasdaq, a 1.61-to-1 ratio favored advancing issues. A total of 9.25 billion shares were traded on Wednesday, lower than the last 20-session average of 11.6 billion.

Hint of Slower Rate Hikes

Markets closed higher on Tuesday after investors shed fears of further economic slowdown owing to China tightening its COVID policies following a surge in new cases, and focus on a batch of earnings from some big retailers.

The upbeat sentiment continued into Wednesday and got a further boost after the minutes from Fed’s November meeting showed that the majority of the policymakers agreed that it would be appropriate to go for slower interest rate hikes in the coming months, as inflation showed signs of cooling off.

This means the Fed could go for a lower rate hike in December and into 2023. However, Fed officials are still unsure how high the benchmark rate would rise to control the multi-year high inflation.

The Fed hiked interest rates by 75 basis points in November for the fourth consecutive time this year, bringing rates to their highest point since 2008. However, with inflation cooling, economists now are expecting a 50-basis point hike in December.

Following the release of the minutes of the Fed’s meeting, treasury yields fell. The 10-year Treasury yield fell to 3.708%, while the 2-year Treasury yield fell 3.6 basis points to 4.481%.

A decline in treasury yields sent growth stocks on a rally. Shares of Netflix, Inc. (NFLX) gained 1.7%, while Microsoft Corporation (MSFT) advanced 1%.

Consumer discretionary stocks also gained on Wednesday. Shares of Carnival Corporation & plc (CCL) jumped 2.8%, while Royal Caribbean Cruises Ltd. (RCL) gained 0.7%.

Economic Data

A lot of economic data was released on Wednesday ahead of the Thanksgiving Day holiday. The University of Michigan’s final reading of the consumer sentiment index saw a decline in November. Consumer sentiment fell to 56.8 in November.

The Commerce Department said U.S. new home sales increased 7.5% to a seasonally adjusted annual rate of 632,000 in October from 588,000 in September.

Durable goods orders unexpectedly rose 1% in October, beating expectations of a rise of 0.4%.

In other economic data released on Wednesday, the Labor Department reported that jobless claims totaled 240,000 for the week ending Nov 19, increasing 17,000 from the previous week’s revised level of 223,000. The four-week moving average decreased to 226,750, an increase of 5,500 from the previous week’s revised average of 221,250.

Continuing claims came in at 1,551,000, an increase of 48,000 from the previous week’s revised level of 1,503,000. The 4-week moving average was 1,509,750 an increase of 28,250 from the previous week’s unrevised average of 1,481,500. [5]

Sources: [1][3] Stockcharts.com; [2] morningstar.com [4] The November jobs report and the Fed matter most to markets in the week ahead (cnbc.com) [5] Zacks Professional Services, “Today’s Key Market and Economic News” for Friday November 25, 2022.