Wall Street and its various moneymakers closed firmly, absolutely, emphatically higher again last week.
All three major indices leaping ahead for an impressive sixth straight week, with the S&P500 closing less than 0.1% below its 2023 high.
Well, almost all three… the Dow Jones Industrial Average was actually only average for the week, but the unstoppable S&P 500 and the tech furious Nasdaq Composite both clocked in a headline six-week streak, up +0.2% and +0.7%, respectively.
It’s their longest winning streak in three years.
On Friday the S&P 500 locked in a new intraday high for the year after November jobs and the Uni of Michigan consumer survey data spoke further to the economic resilience at work in the US.
The broader index touched 4,610 points in late Friday trading and is now ahead for 2023 by some 20%. It closed Friday within <1% of its one-year high.
James Gerrish from Market Matters is ‘cautiously bullish’ toward US equities, short-term.
“We are looking for the US major indices to underperform the ASX as the influential ‘Magnificent Seven’ tire after a stellar advance through 2023, i.e. year to date, the NASDAQ is up +47%, compared to the S&P500, which has advanced +19.9%. The poor ASX200 is only up +2.2%, due to its lack of influential mega tech/AI names.”
It was an encore of gutsy strides up the middle of the park for the forward pack of the year – with the tech heavyweights Mssrs Nvidia (NVDA), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), Meta Platforms (META) and Tesla (TSLA) all making easy metres for the tech-heavy which now sits 14,404 points.
The main question heading into the week is whether this rally will continue. Gerrish reckons that’s a 10-4.
“The FANG+ & NASDAQ Indices followed the MM roadmap to fresh 2023 highs; we are now expecting the broad-based S&P500 to follow, no longer a big call, it’s now less than 1% away.
“We continue to believe global and US stocks can maintain their upside momentum into 2024,” he adds. “All-time highs for the S&P500 are only 4.4% away, not out of the question and if the index manages to match November’s advance, it will post a new milestone.”
US small caps outperformed their better-known rivals through November and have continued to do so into early December. However, even after the recent +15% recovery, the small-cap index is more than 20% below its 2021 high, which leaves plenty of room to squeeze higher.
Via MarketMatters
“We can see the Russell 2000 (small caps) testing the 2000 area into Christmas, or +6% higher – a similar move would take the S&P500 to a new all-time high.”
And last week, spot gold prices climbed to a fresh glittering record high of US$2,100, and a day or so later Bitcoin pushed past US$44,000, to say hullo to its highest level since April last year.
Elon Watch
It’s nigh on the end of another year and Elon’s Tesla has a bit more manic business to do ahead of securing another stock surge-inducing beat on Wall Street quarterly expectations.
Even for EM, hitting the near 500k production mark (amid higher rates, stiffer competition) will not be a shoe-in.
But as Barron’s noted this weekend, instead of more EV price cuts, Elon is now instead offering capital I Incentives.
Barron’s looked at said incentives on Tesla vehicles in inventory:
Buyers can get almost US$4,000 off several Model Y vehicles plus six months of free supercharging. The charging benefit can be worth roughly $900 or more, depending, of course, on how committed any driver is to using the free charging.
Total incentives can amount to more than 8% of the transaction price. The average incentive on new U.S. car sales in October was about 5% of the transaction price, according to automotive data provider Kelly Blue Book.
The Week Ahead
It makes perfect sense that everyone is glued to the December 12-13 Federal Open Market Committee (FOMC) meeting amid what S&P Global Market Intelligence are calling the ‘ongoing disconnect between the Fed’s hawkish-leaning rhetoric and the market’s conviction of early rate cuts.’
Risky assets, including equities, remained supported ahead of the US labour market report this week, bringing added attention to how the Fed may help shape the market’s views on the interest rate path forward in its December meeting.
That said, the Federal Reserve is almost certain to keep its policy rate unchanged on Wednesday as the US economy finally appears to be losing some steam and inflation is coming under control.
Chair J. Powell has set the bar high for raising rates again, while investors have gone a step further and completely priced out any chance of additional tightening.
The focus therefore on Wednesday will be how soon the Fed will start lowering rates, specifically how many rate cuts do FOMC members foresee in the updated dot plot that’s due the same day.
As far as Fed chair’s recent speech showed, the market is placing far greater focus on data indications and indeed, price indications, including from S&P Global US PMI data, have showed that CPI may further ease and even close in on the Fed’s 2% target soon.
More up-to-date December flash PMI data will also be due Friday for the freshest insights into price trends in the US in the final month of 2023.
The next wall of worry is already being built, Stateside.
US government debt has hit $US33trn, which is about 120% of the US economy.
T’is much.
A muchly-mountain to climb – and someone will have to soon, because lots of headline investors and Dimon-shaped CEOs have been using phrases like ‘tipping point’ and ‘crunch time’ to suggest the point at which the debt grows too high to repay – is in the post for the US government.
The bigger hassle is probably not that the White House is in no hurry to stop its spending, but that funding for its increasingly volatile global millitary projects remains stuck in neutral on Capitol Hill.
That’s a national security vs fiscal deficit debate.
Republican vs Democrat simmering partisan conflicts continue around Ukraine… not to mention the various immigration policies; asylum procedures; what priorities should be tied to what bills etc etc.
Enough for the White House purse strings official to tell lawmakers on Saturday:.
“Without congressional action, by the end of the year we will run out of resources to procure more weapons for Ukraine and provide equipment from U.S. military stocks.”
The Economic Calendar This Week
Monday 11 Dec
United States Consumer Inflation Expectations (Nov)
Malaysia Industrial Production (Oct)
Norway Inflation (Nov)
Turkey Industrial Production and Unemployment (Oct)
Tuesday 12 Dec
United States CPI (Nov)
Australia Westpac Consumer Confidence (Dec)
Japan PPI (Nov)
Philippines Trade (Oct)
United Kingdom Labour Market Report (Oct)
Eurozone ZEW Economic Sentiment (Dec)
Brazil Inflation (Nov)
India Industrial Production and Inflation (Nov)
Wednesday 13 Dec
United States PPI (Nov)
United States Fed FOMC Interest Rate Decision
South Korea Unemployment (Nov)
Japan Tankan Large Manufacturers Index (Q4)
China (Mainland) New Yuan Loans, M2, Loan Growth (Nov)
United Kingdom monthly GDP, incl. Manufacturing, Services
and Construction Output (Oct)
United Kingdom Goods Trade (Oct)
South Africa Inflation (Nov)
Eurozone Industrial Production (Oct)
Brazil BCB Interest Rate Decision
Thursday 14 Dec
United States Retail Sales
United States Business Inventories (Oct)
Japan Machinery Orders (Oct)
Hong Kong SAR HKMA Interest Rate Decision
Japan Industrial Production (Oct, final)
India WPI (Nov)
China (Mainland) FDI (Nov)
Philippines BSP Interest Rate Decision
Switzerland SNB Interest Rate Decision
Taiwan CBC Interest Rate Decision
United Kingdom BoE Interest Rate Decision
Eurozone ECB Interest Rate Decision
Friday 15 Dec
US S&P Global Flash PMI, Manufacturing & Services
United States Industrial Production (Nov)
Japan au Jibun Bank Flash Manufacturing PMI
UK S&P Global/CIPS Flash PMI, Manufacturing & Services
Germany HCOB Flash PMI, Manufacturing & Services
France HCOB Flash PMI, Manufacturing & Services
Eurozone HCOB Flash PMI, Manufacturing & Services
Singapore Non-oil Domestic Exports (Nov)
China (Mainland) Industrial Production, Retail Sales (Nov)
Eurozone Trade (Oct)
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