Stocks trim rally

The market took a breather from its post-election run-up as traders parsed the latest economic data and got ready for a week of key earnings announcements.

After starting last week with another record high—and its first close above 6,000—the S&P 500 (SPX) pulled back to log its third down week of the past four, testing its mid-October pre-breakout highs in the process:

The headline: Post-election rally cools.

The fine print: A slightly hotter-than-expected inflation reading from the Producer Price Index (PPI), a drop in jobless claims, and strong retail sales may have bolstered impressions the Fed will slow its rate-cutting campaign in the face of continued economic strength. The odds still favor another 0.25% cut next month, but as Fed Chairman Jerome Powell said last Thursday, “The economy is not sending any signals that we need to be in a hurry to lower rates.”¹

The number: 4.43%, the 10-year Treasury yield’s Friday closing price—its highest weekly close since June.

The scorecard: For the past nine weeks, the Russell 2000 (RUT) has been either the strongest or weakest major US index:

Sector returns: The strongest S&P 500 sectors last week were financials (+1.3%), energy (+0.5%), and utilities (-0.2%). The weakest sectors were health care (-5.6%), materials (-3.5%), and tech (-3.3%).

Stock movers: Aligos Therapeutics (ALGS) +37% to $13.99 on Monday, Dave (DAVE) +44% to $90.43 on Wednesday. On the downside, Neurogene (NGNE) -44% to $40 on Tuesday, Inseego (INSG) -40% to $10.83 on Wednesday.

Futures: December WTI crude oil (CLZ4) fell $3.36 for the week, closing Friday at $67.02. December gold (GCZ4) fell $124.70 to $2,570.10, the market’s biggest weekly dollar loss since June 2021. Week’s biggest gains: March cocoa (CCH5) +21.7%, November bitcoin (BTCX4) +18.1%. Week’s biggest declines:  December soybean oil (ZLZ4) -7%, March cotton (CTH5) -5.9%.

Nvidia (NVDA) earnings may be the week’s highlight, but there are plenty of other high-profile names reporting, mostly in the retail sector:

●Monday: Brady (BRC), Symbotic (SYM), Aecom (ACM), Trip.com (TCOM)
●Tuesday: Lowe's (LOW), Medtronic (MDT), Walmart (WMT), Keysight (KEYS), Powell Industries (POWL)
●Wednesday: Dycom (DY), Target (TGT), TJX (TJX), Nvidia (NVDA), Palo Alto Networks (PANW)
●Thursday: BJ's Wholesale Club (BJ), Deere & Co. (DE), Copart (CPRT), Gap (GAP), Intuit (INTU), Ross Stores (ROST)
●Friday: Buckle (BKE)

This week’s numbers include:

●Monday: NAHB Housing Market Index
●Tuesday: Housing Starts and Building Permits
●Thursday: Philadelphia Fed Manufacturing Index, Existing Home Sales, Leading Economic Indicators Index
●Friday: S&P Global Manufacturing and Services PMIs (flash), consumer sentiment

Check the Active Trader Commentary each morning for an updated list of earnings announcements, IPOs, economic reports, and other market events.

While the US election removed an element of uncertainty that had hung over the markets for months, it introduced another: How will a new administration’s policies impact the economy and markets?

While discussions regarding the specifics of those policies are merely guesswork at this point, Morgan Stanley & Co. economists think the U.K.’s recent experience with proposing a new budget after an election may offer some insights into how things could play out on this side of the pond.² In short, election uncertainty may be gone, but policy uncertainty will likely be with us for a while.

Last week the SPX fell more than 2% a week after it rallied more than 4% and hit its highest high in at least two months—something it’s done only eight other times over the past six decades. That’s not much to go on, but the index closed higher the next week six times, and split the following week between gains and losses.

If we look at similar, but slightly less extreme versions of this move, a similar pattern emerges. For example, the SPX fell at least 1% a week after it rallied at least 3% and made a four-week (or longer) high 43 times since 1964. It closed higher the next week 65% of the time, but closed lower the week after that 55% of the time.³

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¹ CNBC.com. Powell says the Fed doesn’t need to be ‘in a hurry’ to reduce interest rates. 11/14/24.
² MorganStanley.com. U.S. Elections: Lessons From the U.K. 11/13/24.
³ All figures reflect S&P 500 (SPX) weekly closing prices, 1964–2024. Supporting document available upon request.