PAS Weekly Commentary

Inflation Data, Earnings News, and Rising Rates Drive Selling Interest

The Nasdaq Composite closed above 20,000 for the first time this week, settling 0.3% higher than last week.

The S&P 500 and Dow Jones Industrial Average dropped 0.6% and 1.8%, respectively, this week. The Russell 2000 underperformed its peers, losing 2.6%.

There were festering valuation concerns in play that also mixed with chatter of the market being overbought on a short-term basis and due for some consolidation. Market participants used rising market rates as an excuse to engage in profit-taking activity.

The 10-year yield jumped 25 basis points to 4.40% and the 2-year yield jumped 14 basis points to 4.24%. This price action followed disappointing inflation readings and data indicating some softening in the labor market.

Wednesday's release of the November Consumer Price Index (CPI) report met expectations and reinforced the market's anticipation of an upcoming rate cut. Total CPI moved higher on a year-over-year basis to 2.7% from 2.6% and core CPI was at 3.3%, which is still above the Fed's 2% inflation target.

Thursday's release of the November Producer Price Index (PPI) report showed rising inflation at the producer level, which doesn't mix with the market's view of ongoing rate cuts. The index for final demand was up 3.0% year-over-year versus 2.6% in October. Excluding food and energy, the index for final demand was up 3.4% year-over-year (3.45% unrounded versus 3.37% in October).

Market participants also received weekly initial jobless claims, which increased to 242,000 from 225,000 and continuing claims, which increased to 1.886 million from 1.871 million.

Expectations for a 25-basis points rate cut at the FOMC meeting next week increased in response to the data. The fed funds futures market now sees a 95.3% probability of a 25 basis points cut next week, up from 86.0% one week ago, according to the CME FedWatch tool.

In corporate news, Oracle (ORCL) declined 9.6% this week after a disappointing fiscal Q2 earnings report, missing the consensus EPS estimate compiled by FactSet, and issuing lower-than-expected guidance for fiscal Q3. Adobe's (ADBE) FY25 guidance disappointed investors while shares of Broadcom (AVGO) rallied 25.2% this week after solid results and pleasing guidance.

In other news, the ECB's cut its key policy rates by 25 basis points, as expected.

  • Nasdaq Composite: +0.3% for the week / +32.7% YTD
  • S&P 500: -0.6% for the week / +26.9% YTD
  • S&P Midcap 400: -1.6% for the week / +17.8% YTD
  • Russell 2000: -2.6% for the week / +15.8% YTD
  • Dow Jones Industrial Average: -1.8% for the week / +16.3% YTD

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Data and rates used were indicative of market conditions as of the date shown and compiled by Briefing.com. Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. Each company’s security affects the index in proportion to its market value. NASDAQ Composite Index is a market value-weighted index that measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. Dow Jones Industrial Average is a widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials, but also includes financial, leisure and other service-oriented firms. Russell 2000 Index measures the performance of the smallest 2,000 companies in the Russell 3000 Index of the 3,000 largest U.S. companies in terms of market capitalization. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

Park Avenue Securities LLC (PAS) is a wholly owned subsidiary of The Guardian Life Insurance Company of America (Guardian). PAS is a registered broker/dealer offering competitive investment products, as well as a registered investment advisor offering financial planning and investment advisory services. PAS is a member of FINRA and SIPC.

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6974283.15 (Exp. 03/25)

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