S&P 500: +1.67% DOW: +1.96% NASDAQ: +1.72% 10-YR Yield: 4.14%
What Happened?
Wall Street ended the pre-holiday stretch with a fifth consecutive winning session, driven by optimism about a favorable business climate under the incoming administration. The Dow Jones Industrial Average closed at a record high, gaining nearly 1% for the day and 2% for the week, while the S&P 500 and Nasdaq Composite also posted weekly gains of around 1.7%. Investors continued to shift from technology to more economically sensitive sectors, with industrials and consumer discretionary leading the S&P 500. Small-cap stocks outperformed, with the Russell 2000 advancing nearly 4.5% for the week, reflecting a broader rotation into cyclical stocks.
The market’s rally reflects the traditional year-end strength and anticipation of pro-business policies. Utilities emerged as a top-performing sector for the week, and other defensive areas like staples and materials gained traction. Meanwhile, tech lagged due to profit-taking and concerns about tighter export restrictions. The broader market remains supported by robust fundamentals, including resilient economic growth and positive earnings trends, even as investors watch key data like PCE inflation and the Federal Reserve’s upcoming policy decisions. This momentum, coupled with improving market breadth, signals continued optimism heading into year-end.
US Weekly Jobs Claims at Seven Month Low; Home Resale Rebound in October
- Weekly jobless claims drop 6,000 to 213,000
- Continuing claims increase 36,000 to 1.908 million
- Existing home sales rebound 3.4% in October
- Median home price rises 4.0% to $407,200 from year ago
The key takeaway – Unemployment claims in the U.S. fell to a seven-month low last week, signaling a potential rebound in job growth for November after disruptions caused by hurricanes and strikes. Initial jobless claims decreased by 6,000 to a seasonally adjusted 213,000, reflecting a stabilization in layoffs, though it is taking longer for laid-off workers to find new jobs. The continuation of these claims and slower rehiring pose risks to the unemployment rate. The labor market’s slackness, combined with low hiring, supports expectations for another Federal Reserve interest rate cut in December, following the recent 25 basis-point reduction.
In housing, existing home sales rose 3.4% in October, rebounding from a 14-year low in September. This improvement came as mortgage rates temporarily declined earlier in the year, though they have since risen again. Despite higher inventory levels, home prices increased 4% year-over-year to $407,200, reflecting persistent demand. Economists expect sales to remain subdued through year-end due to the renewed rise in mortgage rates. Meanwhile, the labor market and housing data will remain key indicators for the Fed’s upcoming policy decisions.
Dollar Climbs, Euro Weakens to Two-Year Low after PMI Data
- The U.S. dollar traded near a two-month peak against major peers on Thursday as markets grew more confident about a patient approach from the Federal Reserve to further monetary easing, even as a key inflation report loomed later in the day.
The key takeaway – The euro fell to a two-year low, and the dollar strengthened as regional business activity data highlighted economic divergence. Eurozone and UK PMIs dropped below 50, signaling contraction, while the U.S. PMI rose to its highest level since April 2022, driven by strength in the services sector. This reinforced a “two-track world,” with U.S. economic resilience contrasting with struggles in Europe and the UK. The dollar index climbed for a third straight week, while the euro and pound weakened amid expectations of more aggressive rate cuts from the European Central Bank and the Bank of England to support their economies.
Meanwhile, Bitcoin continued its rally toward $100,000, bolstered by optimism over a potential pro-crypto regulatory environment under President-elect Donald Trump. Investors scaled back expectations for Federal Reserve rate cuts, with a 25 basis-point cut now seen as less likely in December. The yen also weakened, prompting speculation about intervention by Japanese authorities, as Japan’s inflation pressures raised expectations of a rate hike by the Bank of Japan in December. Central bank policies and geopolitical factors remain key drivers of currency and market trends.
Bitcoin Hit Fresh Record, Marches Towards $100,000 as Rally Continues
- Bitcoin breached the $99,000 level for the first time Thursday as investors continued pricing in a second Donald Trump presidency.
- Bitcoin has been regularly hitting fresh records this month on hopes that Trump will usher in a golden age of crypto.
- Bitcoin has gained about 130% in 2024.
The key takeaway – Bitcoin surged past $99,000, setting a new record high and approaching the $100,000 milestone, driven by optimism around President-elect Donald Trump’s anticipated crypto-friendly policies. Expectations of reduced regulation, including the resignation of SEC Chair Gary Gensler—viewed as a tough regulator on cryptocurrencies—and the possibility of a national bitcoin reserve, have bolstered market sentiment. Activity in the futures market and short liquidations have also contributed to Bitcoin’s substantial 130% gain this year, reinforcing its role as a hedge against economic uncertainty and inflation.
Other cryptocurrencies similarly posted gains, while crypto-related equities experienced mixed results amid profit-taking. A Shanghai court ruling supporting cryptocurrency ownership in China added to the positive outlook for digital assets. Market enthusiasm underscores growing global acceptance of cryptocurrencies, driven by hopes for a more supportive regulatory framework, broader adoption, and optimism surrounding economic policies that could reshape fiscal dynamics and the international role of the dollar.
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