Everything to Know about Macro and Markets
Stock markets had a stellar week, with the S&P 500 (SPX) rising by 4.66% and the Dow Jones Industrial Average (DJIA) increasing by 4.61%. Meanwhile, the tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) gained 5.74% and 5.41%, respectively.
New Records Pull Inflows
Major stock indexes locked in their best week of 2024 despite some profit-taking declines on Friday. Although the S&P 500 only briefly touched the 6,000-point level, it still logged its 50th record this year. The DJIA crossed the 44,000 threshold for the first time and managed to hold on to the gains as defensive stocks took the lead at the end of the week. Nasdaq Composite and Nasdaq-100 also powered to record highs. The small-cap benchmark Russell 2000 notched its best week since April 2020, pulling within sight of its last record made in 2021.
According to Bank of America, Election Day saw the largest inflows into U.S. equity funds in five months. U.S. stocks attracted $20 billion of investor funds, as money left Chinese and European stocks, which are expected to be impacted by President Trump’s tariffs. U.S. small-cap stocks, seen as the biggest beneficiaries of the proposed protectionist policies, pulled in their largest single-day inflows since March. Some analysts believe that the newly minted stock-index records could ignite even stronger investor exuberance, pulling in additional inflows from the funds stored in money market and short-term debt instruments.
“Trump Bump,” Fed Cut, and Earnings
Last week, two major catalysts of uncertainty were taken off the table, lifting investor spirits. First, a sweeping Trump victory voided fears of a post-election drama, while powering bets of corporate tax cuts, looser regulations, and other business-friendly policy changes. Afterward, the Federal Reserve delivered the widely expected 0.25% interest rate cut, easing concerns over continued headwinds to economic activity from high financing costs. In addition, several technology companies reported impressive quarterly results, helping drive the markets higher.
Federal Reserve Chair Jerome Powell reiterated that the central bank’s future policy decisions will continue to be data-dependent, noting that the economy has remained more robust than was expected, while September’s PCE inflation came in above economists’ projections. Powell said that the Fed sees risks to its employment and inflation goals as “roughly in balance,” adding that the economic outlook remains uncertain. Powell gave off the impression that he believes interest rates remain restrictive even after last week’s reduction, and that inflation seems to be on a path toward a 2% target. While the Fed Chair’s mildly dovish comments showed that policymakers expect to perform additional rate cuts in the future, they opened the possibility the Fed might pause these reductions at its next meeting in December.
Hopes Backed by Statistics
Wednesday was the best post-election session for stocks on record. Meanwhile, last week marked the strongest week so far this year and the best start to any month for the S&P 500 since the previous Election Day in 2020, adding statistics-backed fuel to the fire for increased stock performance expectations.
The November-to-April period has historically produced the best average stock returns versus all other six-month periods. Meanwhile, the May-to-October window has demonstrated the lowest historical returns. This year, the May-to-October period produced a gain of over 15% versus the historical average of 2.14%. Does that mean that the historical averages can be dismissed this year, or that we are entering a period of even stronger returns?
Stocks That Made the News
¤ Financial stocks were a sea of green this past week, as the sector is seen as one of the biggest beneficiaries of the election results, with investors anticipating deregulation and a lighter hand on M&A activities. Banking giants like Goldman Sachs (GS), JPMorgan (JPM), and Morgan Stanly (MS) saw significant gains, while many regional banking stocks clocked in a double-digit weekly surge.
¤ Nvidia (NVDA) made history again last week, as the stock’s surge propelled it to a $3.6 trillion market cap, the first company to reach that mark. President-elect Donald Trump’s anti-regulatory stance sparked additional momentum for many tech giants, with the AI leader snatching the crown of the world’s highest-valued company from Apple (AAPL). Nvidia officially entered the Dow on Friday, replacing Intel (INTC).
¤ Tesla (TSLA) reached $1 trillion in market cap as its shares received an additional lift – besides the general large-cap tech rally – from its CEO and founder Elon Musk’s close relationship with Trump. The EV maker closed its best week since January 2023.
¤ Palantir Technologies (PLTR) was by far the best performer in the S&P 500 last week, clocking in a gain of over 40%. The surge was driven by the company’s strong third-quarter earnings report, which exceeded analysts’ expectations and showcased strong revenue and EPS growth. The financial outperformance was largely attributed to a substantial increase in U.S. government sales.
¤ Qualcomm (QCOM) reported fiscal Q4 EPS and revenues that exceeded expectations, with a notable surge in sales in automotive and IoT divisions. The chipmaker approved a new $15B stock repurchase authorization.
¤ Arm Holdings (ARM) delivered better-than-expected fiscal Q2 sales and earnings, with the strong results fueled by robust royalty revenue stemming from a recovery in the global smartphone market. However, the chip architect didn’t increase its revenue guidance – a move expected by analysts – due to persistent weakness in the industrial and IoT sectors.
¤ AppLovin (APP) saw its stock surge over the past week after posting higher-than-expected revenue and a blowout EPS and producing an upbeat EBITDA guidance for the ongoing quarter.
¤ Taiwan Semiconductor (TSM) notified Chinese chip design companies that it would immediately halt production of advanced AI chips, according to a Financial Times report. This move aligns with the company’s strategy to preempt future U.S. export restrictions.
¤ Fortinet (FTNT) saw its stock strongly increase after it reported Q3 results that exceeded expectations and posted record gross margins. The cybersecurity firm also authorized a $1 billion increase in its stock buyback authorization.
¤ Akamai Technologies (AKAM) was the worst performer among the technology stocks last week, plunging on weak sales and profit guidance for the current quarter and amidst news that the cloud services provider is planning for layoffs.
¤ Lyft (LYFT) saw its shares soar by more than 30% over the week after the company reported strong results in Q3 and raised its full-year revenue and adjusted EBITDA margin guidance.
Upcoming Earnings and Dividend Announcements
The Q3 2024 earnings season is winding down, but many newsworthy earnings releases are still scheduled for this week.
The most notable earnings releases this week are coming from Monday.com (MNDY), Home Depot (HD), AstraZeneca (AZN), Spotify Technology (SPOT), Occidental Petroleum (OXY), Cisco Systems (CSCO), CyberArk Software (CYBR), Walt Disney (DIS), and Applied Materials (AMAT).
Ex-dividend dates are coming this week for International Business Machines (IBM), PPG Industries (PPG), Consolidated Edison (ED), Equinix (EQIX), Exxon Mobil (XOM), Corning (GLW), Starbucks (SBUX), and other dividend-paying firms.
For additional exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.
