US Market: Rally or Sputter Like PSNY?
On Fri, 20 Dec 2024, US market was saved by the bell when the latest inflation report (personal consumption expenditure (PCE) for November 2024), beat expectations.
Personal Consumption Expenditure (PCE).
Latest US inflation numbers for November 2024 :
Headline inflation.
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Monthly: came in at 0.1% vs analysts’ expectations of 0.2% vs October 2024’s 0.2%.
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Annual: came in at 2.4% vs analysts’ expectations of 2.5% vs October 2024’s 2.3%.
Core inflation.
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Monthly: came in much better at 0.1% vs analysts’ consensus of 0.2% vs October 2024’s 0.3%.
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Annual: remained status quo at 2.8% vs analysts’ expectations of 2.9%.
Assessment.
Latest data set can be considered somewhat favorable :
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Inflation Moderated: The headline PCE inflation came in slightly below expectations, indicating that inflationary pressures might be easing.
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Core Inflation Steadied: While core PCE inflation remained elevated, it held steady compared to previous months, suggesting that the Fed's efforts to combat inflation may be showing some results.
US Market - Friday.
And just like that, US stocks rallied to close out the trading week on Friday after two lackluster sessions as a cooler-than-expected inflation report eased worries about the path of interest rates.
By the time 4pm came around:
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DJIA: +1.18% (+498.02 to 42,840.26).
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S&P 500: +1.09% (+63.77 to 5,930.85).
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Nasdaq: +1.03% (+5,930.85).
Advancers, Decliners & Trading volume.
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NYSE: Advancing issues outnumbered decliners by a 2.84-to-1 ratio.
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Nasdaq: On the tech index, it was a 2.12-to-1 ratio.
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Trading volume on US exchanges was 21.58 billion shares, compared with the 14.87 billion average for the full session over the last 20 trading days.
Next Week.
With just 3½ trading days this coming week, I am certain everyone will be wondering what will happen to US market in Christmas week.
[Info] - US market will be closed on Tue, 24 Dec (from 1:00pm onwards) and Wed, 25 Dec 2024.
Economic Reports.
On the run up to Christmas, there are a handful of reports coming out:
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Mon, 23 Dec 2024 - US’s CB Consumer Confidence report (Dec 2024) will be released. Forecast has December data coming in marginally lower at “113” vs November’s readings of “117”.
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Tue, 24 Dec 2024 - US New Home Sales report (Nov 2024) will be dropped. Preliminary estimates is pegged at “650,000” vs October’s data of 610,000 units sold.
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Thu, 26 Dec 2024 - US weekly jobless claims.
I will make it a point to keep myself abreast.
Quarterly Earnings Reports.
The smaller market cap companies continue to release their quarterly earnings, even on Christmas day itself.
None of the companies reporting look familiar except for EV maker - $Polestar Automotive(PSNY)$. It is supposed to report its earnings on Thu, 26 Dec 2024, or Thu, 16 Jan 2025.
These are the 2 dates mentioned online for PSNY earnings reporting.
I don’t think I will be paying attention to this EV maker as I already have a loss-making $NIO Inc.(NIO)$ on hand. (LOL !)
US Market.
On a more sombre note, Reuters predicted a muted Christmas rally this week. (see below)
I already wrote about this in my 01 Dec 2024 post. (click here ! for details, Repost to share ok).
The reasons are a bit different from what Reuters mentioned.
Below are Reuters’ reasonings:
(1) Scrooge-like Returns in December:
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Despite a stellar year, December has delivered disappointing returns so far.
(2) Federal Reserve's Signal:
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The Fed caught investors by surprise, signaling fewer-than-expected interest rate cuts in 2025, leading to a major stumble in the S&P 500.
(3) Market Health:
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8 of 11 S&P 500 sectors are in negative territory for December.
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The equal-weight S&P 500 is down -7%, indicating underperformance of average-sized stocks.
(4) Rising Treasury Yields:
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Benchmark 10-year yields hit their highest level in over 6 months, putting pressure on equity valuations, especially with the S&P 500 trading at a premium to its historical average.
(5) Elevated Stock Market Valuations:
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The S&P 500 is trading at 21.6x forward earnings estimates, well above its historical average of 15.8x, according to LSEG Datastream.
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This makes it more susceptible to negative market shocks.
(6) Narrow Market Rally:
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Gains are concentrated in a few megacap stocks like $Tesla Motors(TSLA)$ and $Alphabet(GOOG)$ , while a majority of S&P 500 components are declining.
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The percentage of stocks trading above their 200-day moving average is at a yearly low.
(7) Came & Went:
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The strong November market performance may have already delivered the typical year-end rally, potentially diminishing its impact in December 2024.
Now you are aware, keep a cautious outlook for US stock market as 2024 ends and 2025 begins.
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Do you think Christmas rally will happen next week ?
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Do you think EV maker Polestar deserves a 2nd look ?
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