(Thursday market close) Big banks, retailers, and heavy equipment makers helped Wall Street to substantial gains Thursday, putting tech in the back seat despite a decent outing for semiconductors after Nvidia's (NVDA) earnings. The S&P 500® index (SPX) is now up four days in a row.
Though one session isn't a trend, it felt like the market reclaimed some of the cyclical strength that dominated right after the election, and, to some extent, earlier this fall. Cyclical sectors like financials and industrials that often do best when the U.S. economy warms up led the way both then and today.
As for Nvidia, investors seemed to vacillate following earnings and revenue that easily beat analysts' expectations but guidance that missed the most bullish hopes. Analysts praised the results almost unanimously and many raised their price targets, helping shares turn the corner after stumbling out of the gate. However, profit-taking led to some early pressure.
Nearly a month before the next Federal Reserve meeting, the market bakes in about 50-50 chances of a third consecutive rate cut. The tone from recent Fed speakers, including Fed Chairman Jerome Powell, has varied from cautious to optimistic about progress on inflation and the state of the labor market. But the Fed has cut rates 75 basis points since September and Powell said clearly last week there's no hurry.
"The case for a Fed pause in December is getting stronger and Fed officials are communicating that they are open to it going into the next meeting," said Kathy Jones, chief fixed income strategist at Schwab. "It will come down to employment and inflation data."
The next U.S. nonfarm payrolls report is due in just over two weeks, with November inflation readings also due before the Fed's mid-December meeting. The October report revealed very soft jobs growth, but that reflected storms and strikes November's readings could clear up confusion, but recent state-by-state jobs data showed cooling even as today's weekly initial jobless claims fell to seven-month lows.
Advancing stocks far outpaced decliners today in a broad rally, and crypto vied for headlines, too, as bitcoin climbed to nearly $100,000 for the first time. The move toward cyclicals and out of mega cap tech and communication services today could reflect a rotation trade with Nvidia earnings over and Alphabet (GOOGL) struggling amid antitrust issues.
Here's where the major benchmarks ended:
• The SPX buoyed 31.60 points (0.53%) to 5,948.71; the Dow Jones Industrial Average® ($DJI) rose 461.88 points (1.06%) to 43,870.35; and the Nasdaq Composite® ($COMP) stayed relatively flat, up 6.28 points (0.03%) to 18,972.42.
• The 10-year Treasury note yield added two basis points to 4.42%, staying rangebound.
• The Cboe Volatility Index® (VIX) slipped to 16.87, still above last week's levels.
Stocks on the move
Thursday was positive for shares of many cyclical firms. Some of the big names climbing the ladder included Deere (DE), Nike (NKE), Costco (COST), Cleveland Cliffs (CLF), Caterpillar (CAT) and Goldman Sachs (GS). At the same time, the PHLX Semiconductor Index (SOX) gained as Nvidia climbed a little under 1%.
The broader market's upward move came without much help from mega caps, as Tesla (TSLA), Microsoft (MSFT), Apple (AAPL), and Alphabet trailed. Seeing major indexes climb even as mega caps sink could be evidence that the rally is broadening beyond the biggest stocks, though of course it's only one session.
Sector-wise, utilities made a late move to lead all sectors despite rising Treasury yields, possibly more evidence of expected increasing power demand related to AI after Nvidia's bullish outlook. Communication services finished last, hurt by Alphabet.
Technically, the SPX and $COMP continue to hover above key support at the 20-day moving averages. That support line is now near 5,880 for the SPX, with secondary support at the 50-day moving average down near 5,800, which also represents early-November lows.
The following companies had stock price moves driven by analyst ratings, quarterly earnings, or other news:
Snowflake (SNOW) surged 32.7% after beating analysts' earnings and revenue expectations. The company's collaboration with Amazon's (AMZN) Amazon Web Services cloud platform has helped Snowflake book revenue, executives said in their earnings call, CNBC reported.
Alphabet slipped 4.7% after the U.S. Department of Justice said it wants the company to sell its Chrome web browser after a court determined the company has an illegal monopoly over search. Chrome is a small part of Alphabet but could be worth up to $20 billion, media reports said.
Deere (DE) advanced 8.1% as earnings beat expectations even while the company's outlook appeared conservative. A soft agriculture market and high interest rates have led to a poor harvest lately for the industrial giant. Revenue fell sharply in the quarter but easing inflation and a tighter corporate wallet lowered costs, contributing to the earnings beat.
Consumer, manufacturing data line up Friday
Final November University of Michigan Consumer Sentiment rounds out the data calendar just after tomorrow's open. Analysts expect a headline of 73, equal to the preliminary reading, according to Briefing.com. Year-ahead inflation expectations dropped to 2.6% from 2.7% earlier this month, the lowest in almost four years, so it's important to track any possible changes in that metric tomorrow.
Also, tomorrow morning, stay tuned S&P Global PMI data, which could show economic activity picking up steam after last month's gains in new orders and drops in inventories. Activity might have picked up recently as the prospect of increased tariffs under a new U.S. administration encourages buying and selling ahead of the inauguration, which is right at two months from now.
For the U.S. S&P Global data, it's likely another divergent set of numbers. The U.S. S&P Global Manufacturing PMI is seen at a headline of 48.8%, according to Trading Economics, below the 50% needed to show expansion and below the previous 49.2%. But services are seen at 55.2%, up from 55.1% in the prior report.
Initial weekly jobless claims out earlier today looked relatively light at 213,000, below the Briefing.com expectations of 221,000 and the lowest since April. Falling claims could indicate workers returning after some high-profile strikes in September and October. But continuing claims continued rising and topped 1.9 million for the first time in three years. Fed speakers this week said the labor market continues to cool.
October existing home sales eked out monthly and year-over-year gains. The headline 3.96 million seasonally adjusted annual rate beat the Briefing.com consensus for 3.9 million and rose from 3.84 million in September. Mortgage rates are up sharply over the last month and buyer enthusiasm remains constrained, but the nearly 3% annual rise, albeit still to low historic levels, indicates some life in the market.
October leading indicators from the Conference Board were worse than expected, down 0.4%. Analysts had seen leading indicators falling 0.3%. Leading indicators have been red the last two years almost without exception, but the U.S. economy grew.
Today, Chicago Fed President Austan Goolsbee told an audience inflation is on its way to the Fed's 2% target and added, "If we look out over the next year or so, it feels to me like rates will end up a fair bit lower than where they are today," Barron's reported.
Though Fed policymakers have stayed mum on potential ramifications of the new administration's policies on trade and immigration, there's little doubt it factors into the market's narrowing chances of rate cuts in the coming year.
"We are looking for the bond market to trade in a broad range due to uncertainty about policy in 2025," Schwab's Jones said. "Tax cuts, tariffs and limits on immigration could add to inflation pressures. The term premium has already started to rise as a result of these concerns. Longer term, the terminal rate will probably be closer to 3.5% than the September estimate of 2.75%."
The "terminal" rate is where participants think borrowing costs will be when the Fed finishes the current trimming cycle. Rates could wind up higher than previously thought due to economic growth and fiscal policy, with next month's Fed projections likely to reflect that.
As of late today, traders see 55% chances rates will fall 25 basis points at the conclusion of the Federal Open Market Committee (FOMC) meeting December 17–18 and a 45% chance of no move, based on the CME FedWatch Tool. The odds of a cut are down dramatically from 72% a week ago, reflecting Powell's cautious words.