Market Optimism
The Nasdaq and S&P 500 hit new all-time highs on Friday, fueled by upbeat forecasts from companies like Lululemon Athletica. An additional driver was the U.S. employment report, which increased expectations that the Federal Reserve will decide to cut interest rates as early as this month.
However, the Dow declined, helped by a 5.1% drop in UnitedHealth Group (UNH.N).
Consumer Staples Sectors Are Strong
Among the S&P 500 (.SPLRCD) sectors, the consumer staples tier was the best performer, gaining 2.4% to reach an all-time high, led by Lululemon.
Lululemon Athletica and Ulta Beauty Lead the Way
Sportswear maker Lululemon Athletica (LULU.O) surged 15.9% after the company raised its full-year revenue forecast. The positive sentiment was also supported by the retail segment, with shares of cosmetics chain Ulta Beauty (ULTA.O) rising 9% after an upward revision to its full-year profit forecast.
US Labor Market Situation
The US Labor Department report showed a strong job gain in November. However, the unemployment rate rising to 4.2% signals some signs of weakening in the labor market.
A Rate Cut Nearer?
"These data support the possibility of continued rate cuts at the December Fed meeting and into the first quarter of next year," said Bill Northey, senior investment officer at U.S. Bank Wealth Management.
These factors have combined to fuel investor optimism and confidence in the economic recovery.
Records Amid Mixed Dynamics
The Dow Jones Industrial Average (.DJI) fell 123.19 points, or 0.28%, to 44,642.52 on Friday. Meanwhile, the S&P 500 (.SPX) rose 15.16 points, or 0.25%, to 6,090.27, and the Nasdaq Composite (.IXIC) added 159.05 points, or 0.81%, to 19,859.77.
The day marked the 57th all-time closing high for the S&P 500 in 2024 and the 36th all-time high for the Nasdaq Composite in the same period.
Nasdaq has had a great week
On a weekly basis, the Nasdaq is up 3.3%, the S&P 500 is up about 1%, and the Dow is down 0.6%. These numbers reflect investor appetite for tech and fast-growing companies as traditional sectors slump.
Investors Await Fed Action
Market participants are focused on the upcoming Federal Reserve meeting on December 17-18. According to LSEG calculations, the probability of a 25 basis point rate cut is estimated at 90%, a significant increase from the previous 72%.
The Fed has already cut rates by 75 basis points since September, initiating a cycle of monetary easing, which has increased hopes for further support for the economy.
Inflation Factor Remains Tense
Fed Governor Michelle Bowman warned that inflation risks remain on the agenda, which may require a cautious approach to future rate changes.
Market Preparing for a New Stage
Ahead are key decisions that will determine the direction of the economy and sentiment in financial markets. While some indices are storming new peaks, others are facing adjustments - this balance will continue to shape investor strategy.
Wall Street on a roll: Stocks rise, volatility falls
Shares in Meta Platforms (banned in Russia) rose 2.4% after a U.S. appeals court upheld a law requiring ByteDance, the Chinese company that owns TikTok, to sell its popular short-video app. Failure to do so could result in TikTok being banned in the U.S. as early as next year.
The ruling has sparked interest in U.S. tech giants that could benefit from potential restrictions on TikTok.
Volatility at Lows
The Cboe Volatility Index (.VIX), known as a leading gauge of "fear" on Wall Street, fell to 12.77, its lowest since July, reflecting investor confidence in market stability amid positive news.
Stocks on the Market: Advances and Declines
On the New York Stock Exchange (NYSE), decliners outnumbered advancers by a modest 1.01 to 1. However, 354 companies made new highs, while 98 made new lows.
On the Nasdaq, activity was more pronounced, with 2,610 stocks advancing and 1,678 falling. The ratio of advancers to decliners was 1.56 to 1.
Volume is falling, but remains high
Trading volume on U.S. exchanges was 12.99 billion shares, below the average of 14.5 billion over the past 20 trading days. The decline in volume can be explained by seasonal factors and the partial end of the news cycle.
Bets on a rate cut continue to rise
After the release of employment data, investors are confident that the Fed will continue its course of rate cuts, which is fueling interest in stocks. This confidence, combined with relatively low volatility, creates an optimistic backdrop for the final trading sessions of the year.
The U.S. stock market ends the week on a positive note, demonstrating a confident increase in interest in key companies and signaling prospects for further strengthening of the economy.
Investor Optimism Amid Strong Employment Data
Stock markets are rallying as investors build on expectations that the Federal Reserve will cut interest rates as early as December. That outlook was supported by the release of employment data that showed a strong increase in the number of jobs in November.
Futures markets are now pricing in an 85% chance of a 25 basis point rate cut at the Dec. 17-18 meeting, well above the 68% previously seen at the start of the session.
Strong Job Gains as Unemployment Rise
Nonfarm payrolls increased by 227,000 in November, beating analysts' expectations of a gain of 200,000. That's well ahead of the revised October gain of just 36,000, limited by the effects of hurricanes and widespread labor strikes.
However, the rise in unemployment to 4.2% despite improving employment figures points to more complex structural changes in the labor market.
Investors find a balance between optimism and risks
"The data is like a holiday buffet: jobs are stabilizing, the revised data are encouraging, but unemployment is rising even as the labor force participation rate declines," said Lindsay Rosner, head of diversified investments at Goldman Sachs Asset Management.
According to her, these statistics do not disrupt the festive mood in the markets, and the Fed remains on track to cut rates in December.
European crisis increases interest in the dollar
At the same time, the euro weakened against the dollar amid political instability in France. The situation in the European economy is causing concern among investors, increasing the attractiveness of the dollar as a safe-haven asset.
December forecasts: lower rates and stable markets
As we await the Fed's decision, markets continue to demonstrate confidence in the resilience of the US economy, which creates a favorable backdrop for the end of the year. Meanwhile, political risks in Europe are reinforcing the importance of the United States as a global leader in economic stability.
Technology sets the tone
The S&P 500 and Nasdaq ended Friday with solid gains of 0.25% and 0.8%, respectively, driven by optimistic forecasts from companies such as Lululemon Athletica and Ulta Beauty, whose strong results sparked a positive reaction from investors.
At the same time, the Dow declined, influenced by a 5% drop in UnitedHealth Group shares, which put significant pressure on the index.
Global markets are up
The MSCI Global Equity Index (.MIWD00000PUS) added 0.2%, continuing its recovery trend amid data confirming stability in major economies.
Lower bond yields support the market
U.S. Treasury yields fell to their lowest in six weeks. Thus, the yield on 10-year bonds fell by 2.9 basis points, reaching 4.153%, and 2-year bonds, more sensitive to changes in the Fed rate, lost 4.8 basis points, falling to 4.098%.
Strengthening Dollar: A Temporary Phenomenon?
The U.S. dollar index rose 0.3% to $106.05 after the jobs report, but TD Securities cautioned that sustained strength in the U.S. currency could be difficult. "We expect the dollar to weaken in the short term, opening up buying opportunities in early 2025," the research note said.
European Markets Strengthen
European stock indexes also ended the week higher. French shares posted their biggest daily gain in three weeks despite ongoing political instability in the country. Investors welcomed the fiscal outlook and encouraging U.S. employment data.
Going for Stability
Friday's market performance underscored investor optimism based on hopes for further monetary easing by the Federal Reserve. This, coupled with strong corporate earnings and stabilizing bond yields, creates a favorable backdrop for the end of the year.
STOXX 600 ends the week on a positive note
Europe's STOXX 600 index rose 0.2%, marking its seventh consecutive day of gains. It was the strongest weekly performance in ten days, confirming the continued appetite for European assets.
Asian stocks recover thanks to China
In Asia, the MSCI Asia-Pacific ex-Japan (.MIAPJ0000PUS) pared earlier losses, gaining 0.2%. The main driver was a rally in Chinese stocks, which offset investor caution over political tensions in South Korea.
China's stock market hit three-week highs, helped by heavy buying of tech stocks, ahead of a summit to set the country's economic goals for next year.
Political stability in France boosts confidence
French bond yields fell and the risk premium over German bunds hit a two-week low after French President Emmanuel Macron said he would appoint a new prime minister to help resolve the 2025 budget.
The euro rose on the news, but corrected on Friday, falling 0.23% to $1,056, reflecting some profit-taking.
Bitcoin hits $100,000 and continues to climb
In the cryptocurrency market, Bitcoin surpassed the $100,000 mark for the first time on Thursday, reflecting positive expectations for regulatory changes in the US. After initial profit-taking that temporarily pushed the price down to $92,092, Bitcoin has regained momentum. The latest trades showed a 2.3% gain on the day, pushing the price to $101,300.
Markets await new decisions
Amid the growth of global indices and strong dynamics of key assets, investors remain cautiously optimistic. Attention is shifting to upcoming economic events that will determine the further trajectory of both traditional markets and crypto assets.
White House Appointment: Betting on Future Technologies
US President-elect Donald Trump on Thursday announced the appointment of former PayPal COO David Sachs as the "AI and Crypto Czar" in his administration. This decision demonstrates the desire of the new US leadership to radically revise the national policy on blockchain technologies and AI.
"We are entering an era of digital revolution, and I count on David to be a key architect of our strategies in this area," Trump said in his statement.
Analysts see market instability
Tony Sycamore, an analyst at IG, described the situation in financial markets as "a surge in volatility with signs of a classic breakdown." Investors continue to adjust to news of significant political changes and fluctuations in global economic forecasts.
Oil Loses Ground on Supply Surplus Fears
Oil prices fell about 1.5%, bracing for a week of losses. Despite OPEC+ extending production cuts until the end of 2026, analysts predict a supply surplus as early as next year, due to forecasts of falling global demand.
This dynamic could pose a challenge for oil-producing countries whose budgets depend on stable energy prices.
Gold Rises
Amid global uncertainty, gold prices showed a slight increase, reaching $2,632 an ounce. The precious metal continues to be a safe haven asset, especially during times of economic turbulence.
New challenges and opportunities
The appointment of David Sachs demonstrates the US's determination to take a leading position in AI and blockchain technologies, which will inevitably impact global markets. At the same time, falling oil prices and rising gold prices highlight that economic and political changes require investors to adopt more flexible strategies.
