Stocks Extend November Gains Ahead of Holiday

U.S. equities extended a robust November upswing Wednesday and went into the Thanksgiving holiday on a firm note. Subdued Treasury yields and growing investor optimism that interest rates have peaked helped lift the S&P 500^® Index (SPX) and Nasdaq Composite^® (COMP) to the sixth gain in the past seven days.

With earnings season largely over and little major economic news, investors appeared content to mark time ahead of Thursday's holiday and an abbreviated session Friday. A lukewarm reception to quarterly numbers from chip designer NVDIA (NVDA) late Tuesday did little to dampen enthusiasm for large-cap technology shares, which helped lift the Nasdaq-100^® (NDX) to a 22-month -high.

Broadly, the market continued to be buoyed by beliefs in inflation's continuing retreat and that still-firm economic numbers signal the Federal Reserve can quarterback a "soft landing" avoiding recession.

"Hopes for the soft landing have helped risk assets," such as stocks, says Collin Martin, director of fixed income strategy at the Schwab Center for Financial Research and Michelle Gibley, director of international research at Schwab. "Credit spreads have fallen sharply over the last few weeks and are near their lowest levels since early 2022."

"Treasury yields are at the low end of their two-month trading ranges, with very few market-moving economic releases this week," they added. "We don’t expect sharp yield moves in either direction given the short holiday week. Next week should be more market-moving, with all eyes on the Personal Consumption Expenditures (PCE) report next week," referring to a key inflation measure.

Here is where the major benchmarks ended:

• The S&P 500 Index was up 18.43 points (0.4%) at 4,556.62, near a four-month high close; the Dow Jones Industrial Average^® (DJI) was up 184.74 points (0.5%) at 35,273.03; the Nasdaq Composite was up 65.88 points (0.5%) at 14,265.86.
• The 10-year Treasury note yield (TNX) was down about 1 basis point at 4.41%, after earlier dropping to a two-month low under 4.37%.
• Cboe Volatility Index (VIX) was down 0.50 at 12.85.

Communications services and technology were among the strongest performers Wednesday. Food and beverage companies were also firm. Energy shares were among the weakest performers Wednesday behind a drop of over 1% in WTI Crude Oil futures (/CL). ), which fell following reports OPEC delayed a weekend meeting until November 30, a possible reflection of cartel members struggling to reach consensus over production cuts. WTI crude ended just under $77 a barrel, down 19% from a 2023 high above $95in late October.

Stocks on the move

The following companies had stock price moves driven by quarterly earnings, analyst ratings or other news:

• Autodesk (ADSK) fell nearly 7% after the software company’s profit guidance for the current quarter disappointed investors.
• Deere & Co. (DE) fell over 3% after the farm machinery maker's fiscal 2024 net income forecast of $7.75 billion to $8.25 billion fell short of expectations.
• Guess? Inc. (GES) plunged 13% after the apparel retailer's third-quarter earnings and revenue undershot Wall Street expectations.
• Nordstrom (JWN) fell over 5% after the department store chain’s quarterly revenue fell short of expectations.
• NVIDIA Corp. (NVDA) fell about 2.5% even as the chip designer’s third-quarter results surpassed estimates and the company’s revenue guidance for the current quarter, at $20 billion, far exceeded expectations. NVDIA's shares are still up 233% for the year.
• Urban Outfitters (URBN) tumbled over 12% despite surpassing earnings expectations for the previous quarter.

Most major retailers have already reported quarterly results, but the industry will remain in market focus as the holiday shopping season commences, including this week's Black Friday and subsequent weekend, a historically heavy shopping period. The National Retail Federation (NRF) expects 182 million people to shop in-store and online from Thanksgiving Day through Cyber Monday this year, up 9.4% from last year. Three quarters of holiday shoppers plan to shop during the five-day weekend, up from 69% in 2019, the last pre-pandemic year.

Early holiday-season shopping activity early could influence shares of companies including Amazon (AMZN), Best Buy (BBY), Kohl's (KSS), Macy's (M), Target (TGT) and Walmart (WMT), among others, as investors try to get a sense of overall consumer spending as the year draws to a close.

Eye on Labor Market

Economic news Wednesday was a mixed bag but did little to alter the market's widely held conviction that the Fed's most-recent interest rate hike, in late July, was likely its last in the current tightening cycle.

Earlier, the Labor Department reported Initial Weekly Jobless Claims totaled 209,000, down from 233,000 the previous week and lower than expectations for 227,000, based on a Briefing.com consensus. Continuing claims eased slightly to 1.84 million from a downwardly revised 1.862 million the week prior. Continuing claims indicate how quickly unemployed people find new jobs.

Despite the latest drop, continuing claims trended higher for much of the past two months, suggesting the labor market is slowing as unemployed people aren't landing new jobs as quickly as they were earlier in the year.

Signs of slowdown in the labor market in recent months, combined with softer-than-expected inflation readings, have led to a near-unanimous view that the Fed's next move with rates will be a cut sometime next year. Late Wednesday, traders assessed 95% odds the Federal Open Market Committee (FOMC) will hold its benchmark funds rate unchanged following its December 12–13 meeting, based on the CME FedWatch Tool. The market also sees a 56.5% chance the Fed could cut rates by a quarter-point or more in May.

Also Wednesday, the University of Michigan's final Index of Consumer Sentiment for November was 61.3, an upward revision from 60.4 in the preliminary figure earlier this month but still down from 63.8 in October and the fourth consecutive monthly decline.

Survey director Joanne Hsu said the sentiment figure reflected a mix of factors, some of which improved while others worsened. "More-favorable current assessments and expectations of personal finances were offset by a notable deterioration in expected business conditions," Hsu said in a statement.

Wednesday's other data point, Durable Goods New Orders, posted a larger-than-expected 5.4% decline in October, down from a 4% increase the previous month and well below expectations for a decline of about 3.1%. Excluding transportation, October orders were unchanged, contrary to forecasts for a 0.2% gain.

Economic news next week includes Monday's October New Home Sales. Analysts expect a seasonally adjusted annual rate of 730,000 sales, down from 759,000 in September, according to Trading Economics. The report follows a surge in mortgage applications this week as the average rate fell below 7.5%, though mortgage applications remain down about 20% from a year ago.

The Personal Consumption Expenditures (PCE) report next Thursday might be the most impactful data point of the week. The PCE is the Fed's preferred inflation gauge, so a higher-than-expected number could trigger an upswing in Treasury yields that could  likely pressure stocks.

But PCE numbers have largely eased most of this year in-step with other inflation benchmarks, including the Consumer Price Index (CPI). In September overall PCE was up 3.4% compared with the same month a year earlier, while core PCE, which excludes food and energy costs, increased 3.7%, the lowest year-over-year reading since May 2021.