(Bloomberg) — A rally in the world’s largest tech companies drove stocks toward fresh all-time highs, with traders bracing for a barrage of economic data and remarks from Federal Reserve speakers that will help shape the outlook for interest rates.
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Equities continued to plow ahead, with the S&P 500 poised for its 54th closing record this year and the Nasdaq 100 rising more than 1%. Tesla Inc. rallied 3.5% on bullish analyst comments while Apple Inc. hit a fresh peak. Intel Corp. climbed on news Chief Executive Officer Pat Gelsinger is leaving the job after the chipmaker’s turnaround sputtered.
Even after the strongest rally since the early days of the dot-com boom, the S&P 500 still has room to push higher, according to JPMorgan Chase & Co.’s Andrew Tyler. He says the most popular options trades are wagering the benchmark will hit 6,200 to 6,300 this month, implying a further advance of as much as 4% before the year is over, based on Friday’s close.
This week’s calendar is set to deliver a slew of key data, with Friday’s payrolls report expected to show US hiring jumped in November after hurricanes and a major strike undercut job growth a month earlier. On Wednesday, Fed Chair Jerome Powell participates in a moderated discussion, and investors will await any assessment of the job market and inflation as well as clues to whether the central bank will lower rates in December.
“This week is the last truly important economic data week of 2024,” said Tom Essaye at The Sevens Report. “If results are Goldilocks, then investors will expect a soft landing and a December rate cut. That will keep positive seasonals in place for a year-end grind higher.”
The S&P 500 added 0.2%. The Nasdaq 100 rose 1.1%. The Dow Jones Industrial Average fell 0.3%.
Treasury 10-year yields advanced three basis points to 4.19%. The dollar snapped a three-day losing streak amid a currency warning to BRICS nations by President-elect Donald Trump. French bonds and stocks came under renewed pressure after Marine Le Pen pledged to topple Prime Minister Michel Barnier’s government after he failed to meet her demands on a new budget.
A year ago, equity investors and strategists braced for a potentially turbulent 2024, worrying about the risk of a hard landing for the US economy and rate cuts that could come too late to prevent it. Heading into the year, few anticipated that the S&P 500’s annual gain would be among the best in history.
The S&P 500 is on pace for back-to-back years with 25% returns for just the second time on record — with 1954 and 1955 posting respective gains of 53% and 33%, according to Mark Hackett at Nationwide.
“We now find ourselves in the middle of this ‘Goldilocks’ zone, where economic health supports earnings growth while remaining weak enough to justify potential Fed rate cuts,” he said. “December continues the seasonal tailwind, historically delivering the second-best performance behind November. Other technical tailwinds for the market include financial conditions, sentiment, momentum, and breadth.”
To Sam Stovall at CFRA, after the big November gains, investors still have much to look forward to.
Since World War II, he says the S&P 500 returns in December recorded: 1) the second highest average monthly return 2) the greatest frequency of advance and 3) the lowest standard deviation of returns, which during election years has been nearly 40% below the average for the 11 other months of the year.
December has usually been a stronger month when the market enters the month up solidly year-to-date, according to Bespoke Investment Group.
In the 22 years that the S&P 500 has been up more than 20% in the year through November, the index has averaged a gain of 1.77% in December — with positive returns 77.3% of the time, Bespoke noted.
“The trends in the equity market remain constructive,” said Craig Johnson at Piper Sandler. “We expect a continued broadening into SMID-caps, which should be a rising tide that lifts all boats.”
Small- and mid-cap stocks have the potential to deliver double-digit gains next year under a best-case scenario, although “a lot can go wrong,” according to JPMorgan Chase & Co. strategists including Eduardo Lecubarri.
The group is heavily under-owned after three years of record cumulative outflows, while valuations show an above-average discount to large caps, they wrote. The relative fundamental picture for small- and mid-caps no longer faces headwinds such as rising rates and wages.
The strategists also noted that Trump’s election victory also serves as a catalyst as investors are likely to prefer domestic exposure.
Corporate Highlights:
Super Micro Computer Inc. said an independent review of its business found no evidence of misconduct but recommended that the server maker appoint new top financial and legal leadership.
MicroStrategy Inc. sold 3.7 million shares over the past week and used the proceeds to buy another $1.5 billion worth of Bitcoin, the fourth consecutive weekly purchase announced by the crypto hedge fund proxy.
Cloudflare Inc. was upgraded by Morgan Stanley, which said the software maker can “sustain, if not accelerate, topline growth over the next few years.”
Core Scientific Inc. intends to offer $500 million in convertible notes via a private offering.
Gap Inc. was upgraded at JPMorgan Chase & Co., which said the foundation has been set to support a “consistent playbook of improved merchandising and marketing.”
Roughly 66,000 Volkswagen AG workers across Germany abandoned their posts on Monday, the first wave of temporary walkouts triggered by a stalemate over how to slash costs at the carmaker’s namesake brand.
Stellantis NV Chief Executive Officer Carlos Tavares’s surprise departure leaves the maker of Jeep SUVs and Peugeot cars without clear leadership at a time of significant upheaval in the industry.
Toast Inc. was downgraded at Goldman Sachs Group Inc., which cited an elevated valuation following a recent rally.
Upstart Holdings Inc. was downgraded at JPMorgan Chase & Co., a move that’s based on valuation as shares appear to be “priced for perfection.”
Key events this week:
Fed’s Adriana Kugler and Austan Goolsbee speak, Tuesday
Eurozone S&P Global Eurozone Services PMI, PPI, Wednesday
US factory orders, US durable goods, Wednesday
Fed’s Jerome Powell and Alberto Musalem speak, Wednesday
Fed’s Beige Book, Wednesday
Eurozone retail sales, Thursday
US initial jobless claims, Thursday
Eurozone GDP, Friday
US jobs report, consumer sentiment, Friday
Some of the main moves in markets:
Stocks
The S&P 500 rose 0.2% as of 1:11 p.m. New York time
The Nasdaq 100 rose 1.1%
The Dow Jones Industrial Average fell 0.3%
The MSCI World Index rose 0.2%
Currencies
The Bloomberg Dollar Spot Index rose 0.6%
The euro fell 0.9% to $1.0487
The British pound fell 0.7% to $1.2643
The Japanese yen was little changed at 149.69 per dollar
Cryptocurrencies
Bitcoin fell 2.5% to $95,353.61
Ether fell 3% to $3,598.72
Bonds
The yield on 10-year Treasuries advanced three basis points to 4.20%
Germany’s 10-year yield declined five basis points to 2.03%
Britain’s 10-year yield declined three basis points to 4.21%
Commodities
West Texas Intermediate crude was little changed
Spot gold fell 0.3% to $2,636.28 an ounce
This story was produced with the assistance of Bloomberg Automation.
US stocks closed mixed on Tuesday as investors digested fresh jobs data and new Fedspeak regarding the path forward for interest rates. The S&P 500 (^GS
