U.S. Markets Surge at November’s Close, Previewing December’s Potential
November wrapped up with a strong performance across major U.S. stock indexes, showcasing a promising trend as the year comes to a close.
The Thanksgiving holiday saw all three major U.S. indexes—S&P 500, Dow Jones Industrial Average, and Nasdaq—end the trading week with gains. The S&P 500 and Dow Jones gained over 1%, reaching fresh record highs.
Last Friday marked the S&P 500’s best post-Thanksgiving performance since 2012, while the Nasdaq also made notable gains, though it remains slightly below its all-time high. For November, the S&P 500 rose 5.73%, the Nasdaq increased by 6.21%, and the Dow saw a remarkable rise of 7.54%. The Russell 2000, which focuses on small-cap stocks, surged 10.8%, reflecting optimism about potential deregulation under a possible second Trump administration.
There is a noticeable shift in market dynamics, with sectors like financials and industrials gaining attention while technology stocks, which have driven the bull market for over two years, have begun to lag behind. The semiconductor sector, in particular, has experienced a downturn.
Key earnings reports are still on the horizon, with Salesforce CRM, Marvell Technology MRVL, Lululemon LULU, and Pure Storage PSTG set to announce their results this week.
Positive Seasonality Bodes Well for December
December has a strong track record for stock performance, rising in 9 of the last 10 election years. Historical data shows this month typically brings positive returns for major indexes, averaging gains of 1.6% for the Dow and 1.5% for the S&P 500 since 1950. The Nasdaq ranks similarly as the third-best month since 1971.
The last significant monthly decline during December was in 2018, marking the worst performance for the Dow since 1931. Following a year of strong gains, stocks often see a period of consolidation in early December, driven by profit-taking and tax strategies by institutions.
Interestingly, during election years, the S&P 500 has been up over 83% of the time since 1950. Given the solid performance leading into December, a year-end rally seems likely. In fact, in the past 10 occasions where the S&P 500 climbed 20% or more going into December, the index finished up in 9 of those instances, averaging a gain of 2.4%:
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Economic Indicators Reflect Consumer Strength
American consumers have shown strong spending patterns. Black Friday sales increased by 3.4% this year, according to Mastercard SpendingPulse, with online sales rising even more—up 14.6%. Cyber Monday continued this trend, where spending reached $13.3 billion, marking a 7.3% increase from last year.
While inflation appears to be declining, the Federal Reserve’s recent meeting minutes highlight a cautious approach to interest rate cuts, advocating for a gradual approach dependent on incoming data. The markets are pricing in an 80% likelihood of a 25-basis point cut at the next meeting.
The core Personal Consumption Expenditures (PCE) index rose 0.3% in October, aligning with expectations, and on a yearly basis, it increased by 2.8%.
Regarding economic growth, the second estimate of third-quarter GDP remained unchanged, confirming a 2.8% annualized growth rate. Jobless claims decreased to 213,000 for the week ending November 23rd, a slight drop from the previous week. The November employment report, due Friday, is expected to show an addition of 214,000 jobs.
December’s Key Stocks to Monitor
Payment service provider Block SQ reached a 52-week high on Monday, buoyed by record transaction volumes during the shopping weekend, with 144 million global transactions, up 17% from last year. Despite underperforming in 2023 with an 18.5% return, it’s now a Zacks Rank #3 (Hold).
Image Source: StockCharts
Amazon AMZN also reported a successful November 21st through December 2nd shopping event, achieving their largest sales figures in history. Popular devices included the Amazon Echo and Fire TV. Amazon is rated Zacks Rank #2 (Buy), having gained nearly 40% this year.
Image Source: StockCharts
However, Tesla TSLA faced a setback when a Delaware judge blocked CEO Elon Musk’s hefty compensation package for the second time this year, prompting Tesla to consider an appeal since shareholders had overwhelmingly approved this package. Currently, Tesla is a Zacks Rank #1 (Strong Buy) and has seen its shares rise over 40% this year.
Image Source: StockCharts
Conclusion
The S&P 500 has seen gains of over 25% through November, potentially marking the first back-to-back years of 20% or more increases since 1998-99.
Although current stock levels appear elevated, caution is warranted as we approach year-end. Historically, stock activities tend to pick up in the second half of December, making a year-end rally foreseeable.
Monitoring investment opportunities as we close out 2024 on a high note is advisable. Be sure to keep track of Zacks’ insights throughout this period.
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Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Salesforce Inc. (CRM): Free Stock Analysis Report
Marvell Technology, Inc. (MRVL): Free Stock Analysis Report
lululemon athletica inc. (LULU): Free Stock Analysis Report
Tesla, Inc. (TSLA): Free Stock Analysis Report
Block, Inc. (SQ): Free Stock Analysis Report
Pure Storage, Inc. (PSTG): Free Stock Analysis Report
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The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
