US stock futures experienced a slight downturn in premarket trading on Thursday, marking a shift after reaching new peaks on Wednesday. All four major indices saw their futures trading lower, signaling a potential correction following the previous day’s surge. This subtle shift in market sentiment comes amidst a backdrop of significant economic data and analyst commentary.
The November inflation data, closely watched by investors and the Federal Reserve, aligned with analysts’ predictions. This development significantly boosted the projected probability of another 25 basis point interest rate cut in December. According to the CME Group’s FedWatch tool, the probability jumped to a substantial 98.6%, a sharp increase from 58.75% just a month ago. The Federal Reserve is currently in a quiet period before its December meeting, leaving investors awaiting further policy announcements.
The upcoming release of the producer price index (PPI) data later in the day is expected to provide additional insight into inflationary pressures and potentially influence market direction. Currently, the 10-year and two-year Treasury notes are yielding 4.30% and 4.18%, respectively. Premarket trading on Wednesday showed a similar trend, with the SPDR S&P 500 ETF Trust (SPY) down 0.12% to $606.71 and the Invesco QQQ Trust ETF (QQQ) dipping 0.20% to $528.87.
Wednesday’s session saw a mixed performance, with the Consumer Price Index (CPI) for November rising 2.7% year-over-year, in line with expectations. Core inflation, excluding volatile food and energy prices, remained steady at 3.3%. This relatively stable inflation figure likely contributed to the increased anticipation of a rate cut. Meanwhile, the ‘Magnificent Seven’ tech giants – a group that significantly influences market performance – experienced a remarkable surge. Their combined market capitalization reached a staggering $18.2 trillion, with five companies hitting all-time highs. The Roundhill Magnificent Seven ETF (MAGS), a key benchmark for this group, soared 3.03%, its best daily performance since early November. This rally extended to the broader market, with the S&P 500 climbing 0.82%, nearing its all-time high, and small-cap stocks adding 0.48%. However, the Dow Jones Industrial Average ended the day slightly lower, down 0.22%.
Despite the S&P 500’s near-record high, market breadth revealed a less optimistic underlying trend. Ryan Detrick, chief market strategist at Carson Group, pointed out that 117 stocks in the S&P 500 hit new monthly lows on Wednesday – the highest number since Halloween. Furthermore, 211 stocks reached 10-day lows, the most since September 6th. Detrick noted that while not catastrophic, this indicates a degree of underlying deterioration. This trend of more decliners than advancers on the S&P 500 has now persisted for seven consecutive days, a situation only observed twice since 2010 (August 2011 and December 2018). This observation highlights the need for cautious optimism.
Analyst perspectives offer varied interpretations of the current market situation. Andrew Pease, chief investment strategist at Russell Investments, highlighted potential growth boosts from tax cuts and deregulation, particularly beneficial for domestic and cyclical sectors. He expressed more positive sentiment towards US small-cap equities given lower valuations and improving investor sentiment. However, he also acknowledged the dominance of large-cap stocks and the need for a catalyst to shift returns toward small-caps. He further noted that investment strategies are diversifying, with growth managers focusing on high-growth sectors, value managers exploring M&A opportunities, and core managers balancing cyclical exposure and managing risks in rate-sensitive sectors.
Alex Chaloff, chief investment officer at Bernstein Private Wealth Management, while acknowledging rich valuations in some market segments, maintained a pro-equity stance. He emphasized the presence of investment opportunities and highlighted the appeal of bonds, where investors can benefit from coupon payments even with potential rate hikes.
Looking ahead, this week’s economic calendar includes several key data releases. On Thursday, initial jobless claims data (until December 7th) and the November core and headline producer price index (PPI) will be released at 8:30 a.m. ET. On Friday, the import price index data will be released at the same time.
Individual company news also influenced market movements. Macy’s (M) saw a decline due to weaker-than-expected sales. Nordson Corp (NDSN) fell after issuing revenue guidance below analyst expectations. Adobe (ADBE) experienced a drop despite exceeding earnings estimates but missing revenue guidance. Ciena (CIEN) is poised to report quarterly earnings before the market opens, while several other companies, including DBV Technologies (DBVT), Amplitech Group (AMPG), and Nuburu (BURU), experienced significant price fluctuations based on individual company news. Finally, Trump Media & Technology Group (DJT) is in focus as President-elect Trump is scheduled to ring the opening bell at the New York Stock Exchange on Thursday.
Commodities markets showed mixed results. Crude oil futures were relatively unchanged, hovering around $70.31 per barrel. Gold prices fell slightly, dropping 0.37% to $2,746.59 per ounce. The US Dollar Index also experienced a minor decline. Asian markets showed a mixed performance, while most European markets saw gains.
