Govt abstract:
- GOP sweep 2024 elections
- Fast and conclusive election final result helped unwind hedge trades placed on previous to the election
- Markets rally to all-time highs
- S&P 500 crosses 6000
- Fed minimize charges by 25bps, as anticipated
- Please see the notice on the backside for a notice about fractional shares in reverse splits
Index efficiency for November:
U.S. equities staged a broad-based, post-election rally in November as all the main indices notched new highs.
The S&P 500 posted its finest month of 2024, rising practically 6%, closing the month out at all-time highs. Small-cap shares additionally participated, because the Russell 2000 posted its finest month-to-month achieve since December 2023.
The headline story for the month was the short and conclusive presidential election final result. Republicans within the ensuing days additionally claimed majorities in each chambers of Congress. The GOP sweep will presumably place President-elect Donald Trump’s authorities ready to rapidly enact financial coverage that his marketing campaign ran on, together with decrease taxes, greater tariffs and authorities deregulation which buyers hope will foster financial progress. Promote-side analysts are estimating that federal company tax cuts (from 21% to fifteen%, as proposed by Trump) will increase S&P 500 EPS by 4-5%.
Put up-election, market consideration has turned to Trump’s cupboard nominees which have generated combined reactions. Well being and Human Companies decide Robert F Kennedy Jr. despatched ripples via the healthcare house because the S&P 500 Biotech Index declined over 7% submit nomination. Treasury Secretary decide Scott Bessent was very nicely acquired by the markets due to his hedge fund background and assist for tax reform and deregulation.
The opposite main story for November was the Fed’s continued normalization of financial coverage towards a backdrop of financial progress, which has traditionally been related to a powerful inventory market.
The FOMC voted unanimously at their November assembly to chop the goal vary for the fed funds fee by 25 foundation factors to 4.50‐4.75%. Federal Reserve Chair Jerome Powell stated the U.S. economic system was performing remarkably nicely, with the labor market “normalizing” and inflation cooling off, developments he stated seemed set to proceed. Chair Powell additionally reiterated (as he has a number of occasions prior to now), that coverage is knowledge dependent and future fee choices will likely be made on a gathering‐by‐assembly foundation.
October’s financial knowledge has additionally been a shiny spot for the markets, although it confirmed that the Fed is not out of the woods but in relation to inflation.
Q3’24 GDP studying was unchanged from the advance estimate displaying progress of two.8%. The Fed’s favourite inflation index, the PCE Worth Index, whereas barely disinflationary (+0.3% M/o/M, +2.3% Y/o/Y) was in keeping with economists’ expectations. Private revenue (0.6%) rose above expectations whereas spending ticked up barely.
CPI was inline (+0.2% M/o/M, +2.6% Y/o/Y) and October headline retail gross sales got here in greater than anticipated (+0.4% M/o/M) with massive upward revisions to September’s knowledge (+0.8% vs 0.4% beforehand).
Labor (preliminary and persevering with claims) knowledge remained in line with a standard, although slowing, labor market.
Sector efficiency whole return for November:
Price minimize odds recommend a 66% probability of a minimize on the December FOMC assembly with a pause in January:
Vacation Gross sales:
Mastercard SpendingPulse preliminary 2024 Black Friday knowledge confirmed that U.S. retail gross sales (ex-autos) rose 3.4% in comparison with 2023. In keeping with the report, e-commerce gross sales grew +14.6% Y/o/Y, whereas in-store gross sales elevated solely 0.7%.
The Nationwide Retail Federation (NRF) forecast that 2024 November and December vacation spend would improve 2.5% – 3.5% this yr or about $979.5 billion – $989 billion (2023 noticed $955.6 billion). If so, it could mark the bottom annual improve since 2018 (1.8%). Reminder there are 5 fewer purchasing days this yr between Thanksgiving and Christmas than in 2023.
Earnings commentary:
S&P 500 company earnings for Q3’24 has practically concluded and, in response to Bloomberg knowledge, the common upside beat was 6.91% for the quarter whereas gross sales elevated by 1.31%. The earnings progress fee stood at +8.17% whereas gross sales progress rose 5.08%.
FactSet notes that analysts are predicting low double-digit earnings progress in This autumn’24 (which might mark one of the best efficiency in three years), with expectations of double-digit earnings progress for all 4 quarters subsequent yr.
S&P 500:
Russell 2000:
Yield on the 10-year Treasuries:
Oil:
Our colleague (Brian Joyce, CMT) wrote an attention-grabbing notice on potential breakdown of the WTI chart. I included his feedback on this month’s notice beneath.
WTI crude made its cycle excessive (~$124) in 1H 2022 throughout the preliminary days of the Russia / Ukraine Conflict. For practically three years, there was clearly outlined assist on the ~$66 degree. Over this time, rallies off the $66 assist are persistently making a sample of decrease highs. The declining trendline connecting the decrease highs has been examined on quite a few events which is noteworthy for a couple of causes:
- The rising variety of occasions the resistance trendline is examined will increase its significance.
- The trendline has been a dependable resistance degree each time it has been examined.
- The trendline is converging intently in direction of the ~66 assist degree leading to a “coiling” value motion for the reason that begin of September (circled). This slim/coiling value motion is measurable by a “value volatility indicator” often known as Common True Vary-ATR (decrease panel) which is close to four-year lows.
Durations of low volatility are finally adopted by excessive volatility, which for this chart would doubtless be triggered both by a breakout above the declining resistance line, or conversely a break beneath the $66 assist. A sample of decrease highs into horizontal assist (descending triangle) is historically considered as bearish. Given the heightened geopolitical tensions, it’s noteworthy to see value buying and selling close to three-year lows. An enchancment on the geopolitical entrance is one potential catalyst that might stress value beneath assist. There’s additionally the danger of elevated provides from each OPEC+ and the U.S. beneath the brand new administration. Given the dimensions and period of this setup, a breakdown beneath the $66 assist might be accompanied by robust downward momentum.
WTI Crude (weekly interval):
U.S. Greenback:
The DXY rallied 1.8% in November, following a 3.2% rally in October. As tax cuts change into applied beneath the Trump administration, expectations are for a continued rally within the inventory market and the greenback itself.
Trying forward:
Market’s focus this week will likely be on Friday’s nonfarm payrolls report for November. Economists predict the unemployment fee to stay at 4.1% with 214,000 new jobs added. The studying will come after the variety of jobs added in October plunged to only 12K, resulting from devastation from hurricanes and a protracted strike at Boeing. There will likely be quite a few Fed Communicate headlines over the subsequent week forward of the Dec. 18 FOMC assembly, most notably will likely be Chair Powell this Wednesday. Observe that This autumn triple witch will happen on Dec. 20, with quite a few indices rebalancing together with the Nasdaq-100 Index and varied S&P indices.
Background and Latest Developments implicating Fractional Shares in Reverse Splits.
When an organization results a reverse inventory cut up, it should determine learn how to deal with any fractional shares remaining after utility of the cut up ratio. In lots of instances corporations pays money to the holder in-lieu of issuing the fractional share. Nonetheless, in different instances corporations will choose to “spherical up” any fractional share to the subsequent complete share.
Lately, Nasdaq has noticed that corporations opting to spherical up fractional shares of helpful holders following a reverse inventory cut up are being requested to challenge extra “round-up” shares than anticipated. Consequently, these corporations could face sudden dilution to their capital desk.
For instance, a brand new investor in an organization effecting a 1:20 reverse inventory cut up may purchase one share of the pre-split inventory at $0.50 with the expectation that the ensuing 0.05 fractional share will likely be rounded as much as an entire share after the reverse inventory cut up, price $10.
Whereas the potential revenue in every investor account isn’t nice, as the recognition of “reverse cut up arbitrage” has unfold within the retail buying and selling group and on-line boards, the mixture impact of such transactions has resulted within the corporations being requested to challenge a big variety of round-up shares. In some instances, this has stunned the businesses and induced administrative points.
To guard towards unintended penalties, Nasdaq recommends that corporations seek the advice of with their switch agent and advisors about strategies of dealing with fractional shares.
Firms are additionally reminded that their public disclosures create expectations within the funding group in regards to the dealing with of fractional shares and may decide the suitable technique for dealing with fractional shares earlier than making any such disclosures.
Questions:
When you’ve got questions on reverse splits, please contact Nasdaq Company Information Operations at 877-308-0523 or the Nasdaq Market Intelligence Desk at 888-437-5242.
The data contained herein is offered for informational and academic functions solely, and nothing contained herein needs to be construed as funding recommendation, both on behalf of a specific safety or an general funding technique. All data contained herein is obtained by Nasdaq from sources believed by Nasdaq to be correct and dependable. Nonetheless, all data is offered “as is” with out guarantee of any variety. ADVICE FROM A SECURITIES PROFESSIONAL IS STRONGLY ADVISED.
