The futures markets are trading notably higher this morning following positive momentum in the stock market yesterday. This continued a largely upward trend in stock prices through much of November. A few companies have reported positive developments, including auto manufacturer General Motors (GM), which announced a $10 billion stock-buyback program and dividend increase. The second estimate of U.S. GDP for the third quarter showed that the economy grew 5.2%, on an annualized basis, which was revised higher from the prior estimate of 4.9%. The stock market was buoyed by this update and appears poised for a strong start to the trading day. Readers should note that the Federal Reserve will release the economic Beige Book later today, which may affect trading.
Stocks moved higher yesterday as Federal Reserve Governor Christopher Waller stated that he was “increasingly confident” that current monetary policy would lower inflation to the central bank’s target of 2%. This helped stocks advance as traders thought that a higher interest rate environment would end sooner and be a positive for stocks. Still, the Case Shiller Index showed that home prices were up 3.9% year over year in September, which was up compared to August (+2.5%), even though mortgage rates have eclipsed 8%. During yesterday’s trading session, the stock market moved higher through the early portion, before giving back some of the gains. Overall, the S&P 500 finished higher by 4 points (up 0.10%), the Dow Jones Industrial Average increased 84 points (up 0.24%), and the NASDAQ rose 41 points (up 0.29%). Market breadth was uneven, not favoring advancers nor decliners by a notable amount. Consumer discretionary stocks were among the best performers, while healthcare equities were among the weakest.
In commodity news, oil prices moved higher yesterday as crude oil inventory drawdowns and the increasing potential for an extension of production cuts from OPEC nations occurred. Additionally, oil had previously been trading lower for several weeks, but moved higher after reaching recent lows in mid-November. Elsewhere, U.S. Treasury bond yields were mixed, with short-term rates rising and long-term ones falling. Traders are pricing in no further rate hikes from the Fed and are starting to price in interest rate cuts by mid-2024. The Chicago Board Options Exchange Volatility Index, or VIX, also known as the fear index, briefly rose yesterday before settling at near-breakeven levels. This index has largely traded lower through November.
Quite a few economic reports will be released in the days ahead. These include initial jobless claims, personal spending, and core- and non-core Personal Consumption Expenditures Index of prices from the Bureau of Economic Analysis on Thursday. On Friday, the Institute for Supply Management’s Manufacturing Index and Standard & Poor’s Global Manufacturing Purchasing Managers’ Index are on the docket. A few dozen stocks will report quarterly results in the days ahead, including Dow-30 component Salesforce, Inc. (CRM).
In sadder news, Charlie Munger, who was Vice Chairman of Berkshire Hathaway (BRKB), as well as a philanthropist and one of the most notable value investors of the 20th century, who was long a Value Line subscriber and supporter passed away yesterday in a California Hospital at the age of 99. He will be missed. - John E. Seibert III
At the time of this article’s writing, the author held positions one or more of the companies mentioned.
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