As the first trading session of December approaches, U.S. stocks are expected to start cautiously following a mixed close on Thursday. December is typically a seasonally strong month for the stock market, but traders may approach it with caution due to the uncertainties in the economy. Despite these uncertainties, if incoming evidence continues to support expectations of a soft landing scenario with a cool-off in inflation, cash waiting on the sidelines may flow into stocks and other risky investments, potentially increasing the momentum of the typical “Santa Claus” rally.
Traders will be closely watching Federal Reserve Chair Jerome Powell’s two public appearances for clarity on the rate outlook. Powell’s comments can have a significant impact on the market, so any hints or indications of the Fed’s future actions will be closely analyzed by traders.
In Thursday’s trading, the major indices closed mixed. Profit-taking in some high-profile tech names weighed down on the tech-heavy Nasdaq Composite, while the Dow Industrials advanced solidly. The strong performance of the Dow was fueled by a 9%+ rally in Salesforce, Inc. shares following its quarterly results. The breadth of the market favored advancers, with 24 of the index components closing in the green. Additionally, a tamer reading for the Fed’s preferred inflation gauge helped maintain risk appetite.
Despite the mixed performance on Thursday, the three major averages had a buoyant November. The S&P 500 and the Nasdaq Composite had their best monthly performances since July 2022, while the Dow snapped three straight months of losses and settled at the highest level since January 13, 2022. This strong showing in November bodes well for the market performance in 2024, according to Carson Group’s Ryan Detrick. Historical data on the S&P 500’s performance in years with stellar gains in November suggests that the gains in November could nearly double or more than double in the upcoming year.
In premarket trading on Friday, the SPDR S&P 500 ETF Trust edged up slightly, while the Invesco QQQ ETF fell slightly. The CBOE Volatility Index, which measures market volatility, is trading moderately lower, indicating expectations of reduced volatility in the market.
In terms of upcoming economic data, S&P Global will release its manufacturing purchasing managers’ index, which is expected to show a slip from 50 to 49.6 in November. The Institute for Supply Management’s survey is also expected to show a slight increase in the manufacturing PMI from 46.7 to 47.6 in November. Additionally, the Commerce Department will release its construction spending report for October, with economists expecting a 0.4% month-over-month increase. There are also scheduled speeches by Chicago Fed President Austan Goolsbee and Fed Chair Jerome Powell.
Several stocks are in focus following their quarterly results announcements. Dell Technologies fell about 5.75%, while PagerDuty, Ulta Beauty, and UiPath saw gains. Tesla fell over 1% following a lukewarm reception to its Cybertruck at a delivery event on Thursday. Bank of Montreal and Genesco Inc. are among the companies scheduled to report their quarterly results before the market opens.
In other markets, crude oil futures edged up slightly following a plunge on Thursday despite OPEC+ members agreeing to deepen voluntary production cuts. The yield on the 10-year U.S. Treasury slipped slightly, and the U.S. dollar extended its weakness into December. Asian stocks ended Friday’s session on a mixed note, while major European markets were firmer by late-morning trading.
Overall, traders are approaching the first trading session of December cautiously, but if evidence continues to support a soft landing scenario and a cool-off in inflation, the market could see increased momentum in the typical “Santa Claus” rally.
