Both the NASDAQ Composite and the Standard & Poor’s 500 Index closed at new record highs last week. The NASDAQ rose 3.3% to 19,859.77 and the S&P rose 1% to 6,090.27, with both indices now rising for three consecutive weeks. The Dow Jones Industrial Average move a bit lower, declining .6% on the week to 44,642.52. The stock market advance is being fueled by factors including momentum buying, hopes for tax cuts and deregulation, and an employment picture that is fairly healthy overall.
The November Jobs Report released last Friday showed the U.S. economy added 227,000 jobs last month, which was better than the consensus estimate, and nicely improved from the previous reading. The unemployment rate came in as expected, ticking up a notch to 4.2%. Given the not-too-hot and not-too-cold employment report, investors are still expecting the Federal Reserve will cut interest rates at their policy meeting next week.
The current probability is 85% the Fed will cut rates ¼ percentage point when they announce their policy decision next Wednesday, according to CME Fedwatch. Looking beyond the next move, the market is generally expecting less interest rate cuts in total for 2025 than it was previously forecasting.
For this week, we’ll get an interesting handful of earnings reports, along with the highly important and potentially market moving Consumer Price Index (inflation) report. Expectations are the Bureau of Labor Statistics will report the CPI rose 2.7% on a year-over-year basis through November, a tick higher than in October. This is a key data point which the Federal Reserve considers in determining monetary policy. If this number come in too hot, it would likely be a headwind for the stock market.
On the earnings front – Oracle, Broadcom, Adobe, Costco Wholesale, and Toll Brothers are all scheduled to report results. As we often mention, profits are the mother’s milk of stock prices! For the fourth quarter of 2024, the estimated (year-over-year) earnings growth rate for the S&P 500 is 11.9%, which would mark the highest (year-over-year) earnings growth reported by the index since the fourth quarter of 2021 – according to FactSet.
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