Week In Perspective: Stocks Rise as Bond Yields Fall [04-December-23]

Updated: 04-Dec-23

The Week on Wall Street

A Friday rally turned an otherwise mixed week for stocks into a solid performance.

The Dow Jones Industrial Average picked up 2.42%, while the Standard & Poor’s 500 gained 0.77%. The Nasdaq Composite index rose 0.38% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, ended marginally higher by 0.13%.^1,2,3

Stocks Move Higher

The stock market digested November’s robust gains for much of last week but rallied strongly amid falling bond yields on the last trading day.

Market sentiment remained positive as the Fed’s preferred measure of inflation showed ongoing signs of softening inflation pressures, boosting hopes that the Fed may be able to end its rate hikes and consider rate cuts sometime next year. Investors also welcomed news of solid spending in early holiday sales reports.

The declines in bond yields reflect that the financial markets are positioning for a rate cut soon, even brushing off Fed Chair Powell’s Friday comments suggesting it was premature to consider monetary loosening.

Inflation Eases

The Personal Consumption Expenditures Price index (PCE)–the Fed’s preferred measure of inflation–was released last week, showing core PCE (excludes energy and food) rose 0.2% in October and 3.5% from a year ago. Both were lower than September’s readings of 0.3% and 3.7%, respectively. Perhaps most notably, core prices rose at a 2.5% annualized rate over the last six months, close to the Fed’s target rate and a big improvement over the previous six-month annualized rate of 4.5% ending April.⁴

The report also reflected a slowdown in consumer spending, as October’s 0.2% increase was lower than September’s 0.7% gain, a possible indication of the impact of the resumption of student loan repayments, higher prices, and shrinking savings.⁵

This Week: Key Economic Data

Monday: Factory Orders.
Tuesday: Institute for Supply Management (ISM) Services Index. Job Openings and Labor Turnover Survey (JOLTS).
Wednesday: Automated Data Processing (ADP) Employment Report.
Thursday: Jobless Claims.
Friday: Employment Situation. Consumer Sentiment.

_{Source: Econoday, December 1, 2023 - The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.}

This Week: Companies Reporting Earnings

Tuesday: AutoZone, Inc. (AZO), MongoDB, Inc. (MDB)
Thursday: Broadcom, Inc. (AVGO), Dollar General Corporation (DG)

_{Source: Zacks, December 1, 2023 - Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.}