Fed hints lower, stocks edge higher

11/28/22
  • Stock rebound hits fresh highs, Fed minutes point to smaller hikes
  • Economic data surprises to upside, oil tags two-month lows
  • This week: Jobs report, Fed inflation, Powell speech, home prices

Despite a holiday-shortened trading schedule, the S&P 500 (SPX) extended its fall rally last week as the minutes from the Federal Reserve’s November 1–2 policy meeting showed board members were inclined to hike interest rates less aggressively after four consecutive 0.75% increases:

Chart 1: S&P 500 (SPX), 9/21/22–11/25/22. S&P 500 (SPX) price chart. Fresh high after FOMC minutes.

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)


The headline: Stocks follow Fed’s lead (for now).

The fine print: While last week’s minutes confirmed suspicions the Fed was ready to dial back the size of its future rate hikes, that doesn’t mean the “terminal rate”—the central bank’s ultimate target for the Fed funds rate—has changed. Most analyst forecasts the terminal rate to be between 4.75% and 5.25%. It also doesn’t mean the Fed will immediately pivot to rate cuts after hitting the terminal rate.

The move: Just as the World Cup got underway, shares of Manchester United (MANU) jumped 62% last week amid reports the owners were exploring a sale of the British soccer club—and were only entertaining offers that would make it the most expensive sports franchise in history.1

The number: 1%, the October increase in durable goods orders, which joined new home sales and consumer sentiment in topping estimates last week.

The scorecard: The Nasdaq 100 (NDX) was leading the market last week until it pulled back on Friday:

US stock index performance table for week ending 11/25/22. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source (data): Power E*TRADE. (For illustrative purposes. Not a recommendation.)


Sector roundup: The strongest S&P 500 sectors last week were utilities (+3%), materials (+2.9%), and financials (+2.2%). The weakest sectors were energy (+0.3%), information technology (+1%), and communication services (+1%).

Stock movers: Burlington Stores (BURL) +21% to $189.96 on Tuesday, Coupa Software (COUP) +29% to $58.93 on Wednesday. On the downside, Arvinas (ARVN) -16% to $43.08 on Monday, Dycom (DY) -18% to $90.2 on Tuesday.

Futures: After pivoting off its September lows around $75 last Monday, January WTI crude oil (CLF3), sold off nearly 4% on Wednesday, bounced, then turned lower on Friday to end the week at $76.55/barrel. December gold (GCZ2) pulled back to a nine-day low of $1,719/ounce last Wednesday, then bounced to close Friday at $1,755.

Coming this week

A huge week of economic data builds toward the monthly jobs report, but traders will get another inflation update on Thursday (PCE Price Index):

Monday: Dallas Fed Manufacturing Index
Tuesday: S&P Case-Shiller Home Price Index, FHFA House Price Index, Consumer Confidence
Wednesday: ADP Employment Change Report, Trade Balance in Goods (advance), GDP (Q3, second estimate), Chicago PMI, Job Opening and Labor Turnover Survey (JOLTS), Pending Home Sales, Federal Reserve Chairman Jerome Powell speaks at Brookings Institution, Fed Beige Book
Thursday: Challenger Job Cuts, Personal Income and Spending, PCE Price Index (Fed inflation), S&P Global Manufacturing PMI, ISM Manufacturing Index, Construction Spending
Friday: Employment Report

A surprisingly busy earnings calendar includes a mix of retail and tech names:

Monday: H World (HTHT), Joyy (YY)
Tuesday: CrowdStrike (CRWD), Hewlett Packard Enterprise (HPE), Intuit (INTU), NetApp (NTAP), Workday (WDAY)
Wednesday: Five Below (FIVE), Box (BOX), PVH (PVH), Snowflake (SNOW), Salesforce.com (CRM)
Thursday: Ambarella (AMBA), Big Lots (BIG), Ulta Beauty (ULTA), Designer Brands (DBI), ChargePoint Holdings (CHPT), Dollar General (DG), Kroger (KR), Zscaler (ZS), Ollie's Bargain Outlet Holdings (OLLI), Marvell Technology (MRVL)
Friday: Cracker Barrel (CBRL), Genesco (GCO)

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

Market Mover Update: Despite rallying three out of four days last week, Circor (CIR) closed Friday more than 11% below its November 15 high (see “Avoiding the chase”).

 

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1 ESPN.com. Man United for sale: Glazers seek world record fee. 11/24/22.

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