Weekly Market Performance — November 15, 2024

Additional content provided by Brian Booe, Associate Analyst, Research.

LPL Research provides its Weekly Market Performance for the week of November 11, 2024. U.S. stocks pulled back this week as post-election momentum lost steam, paired with falling rate cut odds after hawkish remarks from Federal Reserve (Fed) Chair Jerome Powell. On the macro side, key inflation data arrived broadly in-line with estimates. International stocks ended lower, with Asian markets continuing to struggle amid fragile sentiment as investors await additional stimulus measures from China while assessing the make-up of the incoming U.S. administration. Treasury yields continued to rise as well as the U.S. dollar, however oil and gold prices printed a weekly decline.

Stock Index Performance

S&P 500 Index Sectors

Fixed Income and Commodities

Source: LPL Research, Bloomberg 11/15/24 @2:45 p.m. ET
Disclosures: Indexes are unmanaged and cannot be invested in directly.

U.S. and International Equities

U.S. Equities: Following last week's action, headlines grew quieter in comparison, although news flow remained focused on President-elect Trump and Federal Reserve (Fed) Chair Jerome Powell. After early-week gains, stocks were not able to climb back above the flatline, pulling the S&P 500 2.2% lower. The tech-heavy Nasdaq closed 3.5% lower, while the Dow shed 1.4% over the last five days. Growth and value stocks both pulled back, as did small caps.  

While major indexes may have ended the week in the red, the benchmark S&P 500 did not fail to excite investors after closing above 6,000 for the first time this Monday, setting record high number 51 for the year. However, the post-election surge fizzled the remainder of the week as markets parsed the new U.S. administration’s cabinet selections, key inflation data, and remarks from Fed Chair Powell. Markets steadied after October consumer price inflation arrived in-line with estimates, alleviating some concerns of a hotter print across Wall Street, and boosting the odds of a December cut. However, stocks struggled in the following session after wholesale inflation matched estimates on a monthly basis, but ticked higher from a year ago, and extended declines following Fed Chair Powell’s Thursday afternoon speech in Dallas. Powell stated that the economy is not signaling that the Fed needs to rush rate cuts, while reminding markets of their focus on the labor market. Major indexes deepened losses on Friday as mega cap tech names dipped, while December rate cut bets retreated, virtually erasing their sharp increase just a day earlier. Earnings reports took a breather this week, with only 12 S&P 500 companies reporting results after the recent flood of reports. Among highlights, Disney (DIS) shares advanced after topping estimates and raising guidance. Although outside the S&P 500, markets noted an upbeat long-term outlook from Dutch semiconductor equipment maker ASML (ASML).  

International Equities: European stocks ended the week mostly lower, with a few major indexes printing weekly gains, such as Spain and Italy. Catalysts remained broadly unchanged across the region, as market watchers continued to mull over the effects of potential U.S. tariffs while monitoring cabinet selections. Stocks did deliver an advance on Thursday after the second reading of third quarter gross domestic product (GDP) for the Eurozone was in-line with preliminary data, which topped estimates upon its release two weeks ago. Nonetheless, weekly losses were extended to close the week as vaccine makers, including index heavyweight Novo Nordisk, sold off on the news that Trump nominated so-called vaccine skeptic Robert F. Kennedy Jr. to be the next U.S. health secretary. Earnings were broadly a bright spot on the week, highlighted by ASML, electrical engineering giant Siemens, and auto parts maker Continental.   

Asian stocks also ended the week in negative territory, continuing to struggle under post-U.S. election pressure and fragile sentiment. Chinese equities failed to find a floor, declining on mostly lackluster economic data as investors continue to wait for stimulus measures geared towards the consumer. Additionally, technology names in Hong Kong sold off Thursday following mixed earnings reports from key names including JD.com, Alibaba, and Tencent. Japan closed lower, with the majority of weekly losses coming on Wednesday after a hotter-than-expected wholesale inflation report reached its highest level in 15 months. South Korea shed nearly 6%, and global market watchers noted sizable declines from Samsung Electronics throughout the week, before trimming losses on Friday. Taiwan and India ended lower, as did Australia and New Zealand, although with more modest losses. Broadly, the strong dollar weighed on international returns for U.S. investors.  

Fixed Income, Currency, and Commodity Markets

Fixed Income: The Bloomberg U.S. Aggregate Index traded lower this week following a renewed surge in Treasury yields on Tuesday, and mixed yields after Fed Chair Powell’s remarks on Thursday. The 10-year yield closed the week 11 basis points higher (0.11%), and the two-year yield ended two basis points (0.02%) higher. 

While last week’s busy week with the presidential election and Fed meeting provided some clarity on the short-term outlook for interest rates, the longer-run outlook remains unsettled. Interest rate swaps are currently pricing in a 4% fed funds rate over the next twenty years, which means markets expect the Fed to cut rates three more times and hold the rate there indefinitely. As such, markets have essentially priced out the prospects of an economic slowdown or geopolitical event that would cause the Fed to cut rates more aggressively at any time over the next 20 years. And while Fed Chair Powell, in his most recent comments, suggested that there was no need to hurry rate cuts with the economy still strong, that will not likely be the case indefinitely. There is an optionality that you get from bonds that you don’t get from cash. While current yields for bonds and cash are similar, bonds offer portfolio protection and potential price appreciation if an unexpected event occurs that would negatively impact the economy that you don’t get from cash. And with markets essentially pricing out the prospects of anything “bad” happening over the next 20 years, the value of that optionality remains attractive, in our view. 

Commodities and Currencies: The Bloomberg Commodities Index traded lower this week. Crude oil slipped almost 5.0% as global demand continues to face threats from economic trends in the U.S. and China. The potential for a slower rate cutting cycle from the Fed and higher than previously expected interest rates placed downward pressure on crude prices, paired with China’s sluggish economy, the world's largest crude importer. Gold continued to decline under pressure from rising Treasury yields and a stronger dollar, while traders unwound some geopolitical risk premium. Silver and copper also declined on the week, albeit silver with more measurable losses. The dollar continued to rise, extending its post-election rally while also finding support from the continued rise in Treasury yields and speculation that yields will remain higher. The yen and euro both declined on the week amid U.S. dollar strength.

Economic Weekly Roundup

Tariffs Will Put Producer Prices on Hot Seat. Thursday’s updated headline release of the Producer Price Index (PPI) was in line with expectations, but we should expect increasing scrutiny as businesses prepare for potentially more tariffs. Headline producer prices for final demand goods rose 0.2% from a month ago, but core prices rose 0.3%, which was a bit faster than expected. In these unique inflationary periods, investors have to look a bit deeper to get insights on trends and risks to the inflation outlook. The biggest contributor to the rise in final demand producer prices was portfolio management, clearly a category immune to tariffs. For those in the wholesaling and retailing industries, the annual pace of producer prices plummeted. 

We should expect a bit more volatility in producer prices, especially as businesses manage supply chains, amid the risk of tariffs. The consumer impacts from tariffs vary widely and are industry specific as businesses often apply for exclusions or bear part of the costs. Consumer prices actually decelerated down to 1.7% in late 2019 after businesses adjusted to the trade war with China. 

Finding a Steady State. October consumer price inflation rose 0.2% from a month ago, the same monthly pace as July, August, and September as inflation is finding its balance. Despite the fairly steady monthly pace of inflation, the annual rate rose to 2.6% and is attributed to abnormal and large declines in gas prices back in October 2023. It does not appear to be signaling a new trend but rather base effects. Higher shelter costs contributed over half of this month’s inflation rate. Clothing, communications, and household furnishings decreased in October, but shelter, used vehicles, airfare, and medical care rose on the month. Meat, fish, and eggs prices fell over 1.2%, the largest monthly decline since May 2023, easing pressure on household budgets. 

The sticky components of inflation continue to ease, giving the Fed some leeway to cut rates either in December or January. Chair Powell is likely preparing markets for the Fed’s “cut-and-pause" cadence for the foreseeable future. The strength of some consumer cohorts is keeping upward pressure on prices as consumer spending hasn’t slowed yet. Stronger than expected economic growth is likely keeping bond yields elevated. 

The Week Ahead

The following economic data is slated for the week ahead:    

• Monday: New York Fed Services Business Activity (Nov), NAHB Housing Market Index (Nov), Total Net TIC Flows (Sep), Net Long-term TIC Flows (Sep) 
• Tuesday: Housing Starts (Oct), Building Permits (Oct) 
• Wednesday: MBA Mortgage Applications (Nov 15) 
• Thursday: Philadelphia Fed Business Outlook (Nov), Initial Jobless Claims (Nov 16), Continuing Claims (Nov 9), Leading Index (Oct), Existing Home Sales (Oct), Kansas City Fed Manufacturing Activity (Nov) 
• Friday: Manufacturing PMI (Nov preliminary), Services PMI (Nov preliminary), Composite PMI (Nov preliminary), University of Michigan Consumer Sentiment Report (Nov final)