Weekly Market Update – November 29, 2024

Quick Takes

• It was a holiday-shortened week on Wall Street, but stocks and bonds were able to make solid gains. The benchmark S&P 500 Index rose +1.0% and ended at a record close, while the Bloomberg U.S. Aggregate Bond Index rose +1.4% for the week.
• Not all assets were able to advance. The U.S. Dollar Index fell for the first time in nine weeks and suffered its largest weekly decline since November 2023. WTI Crude Oil retreated -4.6%, and Gold was down -2.7%. 
• On balance, outside of the manufacturing sector, economic reports during the week mostly matched or beat expectations, continuing a trend throughout most of November. One area of concern was the first uptick in inflation since this summer by the PCE Price Index.

Source: Bloomberg. Data as of November 29, 2024.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Stocks and bonds rally in holiday-shortened week

It was a holiday-shortened week on Wall Street with plenty to be Thankful for investors. U.S. equities were up for a second straight week of gains as the benchmark S&P 500 Index rose +1.0% and ended at a record close, its 53rd all-time high in 2024. With the market closed on Thursday for Thanksgiving Day and shortened hours on Friday, Wednesday was packed with a barrage of economic data. On balance, outside of the manufacturing sector, the reports mostly matched or beat expectations, continuing a trend throughout the month. The second estimate of third quarter Gross Domestic Production (GDP) remained unchanged from the initial estimate at a +2.8% annualized growth rate. Personal Incomes jumped +0.6% in October, twice the rate expected. Personal Spending rose +0.4%, a bit above expectations, although inflation drove much of the increase. Pending Home Sales also beat expectations, rising +2% when they were expected to decline. As shown in the Chart of the Week below, Consumer Confidence hit a 16-month high, as consumer optimism was boosted from rising stock prices, slowing inflation, and a robust U.S. jobs market. On the less positive side, manufacturing remains sluggish and Durable Goods Orders only rose +0.2% versus expectations for a +0.5% rise. The industrial components of the Chicago Fed National Activity Index (CFNAI) also dragged it to its weakest reading since January. On the inflation front, an important inflation gauge came in a little higher than expected. The core version of the Personal Consumption Expenditures Price (PCE) Index, the Federal Reserve’s (the Fed) preferred inflation measure, increased for the first time since this summer. With that result, it wasn’t too surprising to see the release of the Fed’s minutes of its November monetary policy committee meeting show that policymakers discussed the possibility of pausing rate cuts if inflation remains too elevated. 

Beyond U.S. large cap stocks, small caps also rallied, with the Russell 2000 Index gaining +1.2% for the week and the tech-heavy Nasdaq Composite gaining +1.1%. Developed market international stocks (as measured by the MSCI EAFE Index) also rallied, rising +1.8%, but emerging market stocks (the MSCI Emerging Markets Index) weren’t able to keep up and slid -0.8%. President-elect Trump announced he would levy 25% tariffs on goods coming from Mexico and Canada if they didn’t shore up their border enforcement. He also targeted China with an additional 10% tax on products above any additional tariffs if they didn’t stem the flow of fentanyl into the U.S. The Bloomberg U.S. Dollar Index fell -1.3%, its first decline in 9 weeks and largest weekly decline since November 2023. 

In the bond world, yields sank on optimism about the new U.S. Treasury secretary and weaker-than-expected economic data out of Europe, which increased demand for U.S. Treasuries. Trump named Scott Bessent as Treasury secretary the prior Friday. The benchmark 10-year U.S. Treasury note retreated -23 basis points to close the week at 4.17%. Bond prices and yields move in opposite directions, and the Bloomberg U.S. Aggregate Bond Index rose +1.4% for the week. Non-U.S. bonds, as measured by the Bloomberg Global Aggregate ex U.S. Bond Index, were up +2.2%, as yields and the U.S. dollar both fell.

The Week Ahead

The Institute for Supply Management (ISM) and S&P Global both release their respective Purchasing Managers’ Indexes (PMIs) for November this week. Manufacturing PMIs will be released on Monday and the Services equivalent on Wednesday. The Federal Reserve will publish its last Beige Book of the year on Wednesday afternoon, and the University of Michigan releases its Consumer Sentiment Index for December on Friday. The Bureau of Labor Statistics releases the Jobs Openings and Labor Turnover Survey for October on Tuesday, but for most, the main event of the week will be the November Employment Situation Report on Friday. Wall Street is expecting a gain of 190,000 nonfarm payrolls for the month after a shockingly low 12,000 jobs added in October. The unemployment rate is expected to tick up to 4.2% from 4.1%. 

There is a trickle of earnings reports left, including Zscaler on Monday, Salesforce on Tuesday, and Campbell’s and Dollar Tree on Wednesday. Thursday will be busy with Brown-Forman, DocuSign, Dollar General, Gitlab, Hewlett Packard Enterprise, Kroger, Lululemon Athletica, and Ulta Beauty all reporting.

Chart of the Week

The Conference Board’s Consumer Confidence Index surged to 111.7 in November, the highest level in 16 months, from 109.6 the prior month (revised up from 108.7) and roughly in line with Wall Street expectations for 111.8. Americans grew more optimistic about 2025, buoyed by rising stock prices, slowing inflation, and a robust U.S. jobs market. Consumer confidence tends to signal whether the economy is getting better or worse. The Present Situation gauge jumped to 140.9 from 136.1 the prior month (revised lower from 138.0). The Expectations gauge — which reflects consumers’ six-month outlook — improved to 92.3 from 91.9 (revised up from 82.8), the highest level since December 2021, in a sign of renewed optimism. Levels below the 80 mark on the expectations index often signal a recession within the next year. In good times, the index can top 120 or more.

Consumer Confidence Hits 16-month High

(Consumer Confidence Index, 2007 – November 2024)

Note: Shaded regions recessions.
Source: The Conference Board, NBER.

Did You Know?

HOME-EQUITY STASH – Americans are sitting on a $35 trillion home-equity stash that is a potential treasure trove for home-improvement retailers if only stubbornly high borrowing costs would come down. Home-improvement retailers had been eagerly anticipating interest-rate cuts, confident they would unlock the housing market and demand for expensive projects. But rate cuts thus far haven’t translated to lower mortgage rates, and home-equity lines of credit don’t look enticing yet. (Source: The Wall Street Journal)

COSTLY SEATS – The five major U.S. airlines collected $12.4 billion from seat fees, according to a Senate subcommittee report covering 2018 to 2023. Checked bags—the carriers’ biggest revenue source behind tickets—brought in about $25 billion. An industry trade group said that airlines are giving customers more choices and that ticket prices, even with fees, are at historic lows. (Sources: The Wall Street Journal)

THE CHIEF – During week 10 of the NFL season, Chiefs quarterback Patrick Mahomes won his 19th career game after trailing by at least 10 points. Mahomes’ career-winning percentage of 57.6% when trailing by 10+ points is nearly 20 percentage points higher than the next closest QB (Tom Brady, 37.8%).  (Source: Chiefs)

This Week in History

S&L BAILOUT – On November 27, 1991, both houses of Congress passed legislation bailing out the dying savings and loan industry. The bailout bill plowed another $25 billion of taxpayers’ money directly into the S&L bailout while authorizing up to $35 billion in new borrowings to finance the government’s purchase of bad loans. (Source: The Wall Street Journal)

Economic Review

• The cost of goods and services rose for the third straight month in October, with the Personal Consumption Expenditure (PCE) Deflator (aka PCE Price Index) up +0.2%, in line with expectations and matching the prior month’s unrevised +0.2% rate. On a year-over-year basis, the PCE Price Index was up +2.3%, matching expectations and up from +2.1% the prior month. That was the first annual increase since the summer. The Core PCE Price Index, which excludes food and energy and is the Fed’s preferred inflation gauge, rose by +0.3% for the month, matching expectations and the prior month’s unrevised rate. Year-over-year, the Core-PCE Price Index was up a tick to +2.8% from +2.7% the prior month, matching expectations. The elevated core rate has forced senior Fed officials to consider whether to cut interest more slowly, a summary of their last big meeting in November showed.
• The Commerce Department reported Durable Goods Orders for long-lasting items such as televisions, appliances and transportation equipment rose +0.2% in October, below the +0.5% expected. That follows a -0.4% slide the prior month (revised up from the initial -0.7% drop). The decline was largely due to fewer Boeing aircraft orders. Durable Goods Orders, Excluding Transportation, were up +0.1%, matching expectations but down from +0.4% the prior month (revised down from the originally reported +0.5% increase). The important Core Capital Goods Orders (capital goods excluding volatile sectors like transportation and defense), a proxy for business spending, slid -0.2% from +0.3% the prior month (revised sharply lower from +0.7%) and missed expectations for a +0.1% increase. Core Capital Goods Shipments, which are factored into GDP, rose +0.2% after dipping -0.1% the month before, beating expectations for a +0.1% increase. Orders for commercial planes, a volatile category, jumped nearly +9% in October after Boeing workers ended a strike. The end of the strike likely had little effect on bookings because planes take several years to build after orders are received. Meanwhile, orders for new cars and trucks fell slightly with the rest of the report mixed.
• Personal Spending rose +0.4% in October, matching expectations but down from an upwardly revised +0.6% the prior month (originally reported at +0.5%). After adjusting for inflation, though, Real Personal Spending was up just +0.1%, less than the expected +0.2%, and down from an upwardly revised +0.5% the prior month. Meanwhile, Personal Income rose +0.6%, twice the expected +0.3%, which is where it was the prior month (unrevised). The Personal Savings Rate slipped to +4.4 from +4.1% the prior month.
• The Federal Reserve Bank of Chicago reported that U.S. economic activity deteriorated in October, as the Chicago Fed National Activity Index (CFNAI) fell to -0.40 from -0.27 the prior month (which was revised lower from the originally reported -0.28). That is far below the recent February high of +0.35. Readings below zero indicate below-trend-growth in the national economic activity. The CFNAI three-month moving average fell to -0.24 from -0.21 the month before but remains well off the low of -0.35 in December 2022. During the last 20 years, there has been a 91% correlation between the three-month index level and the quarterly change in real GDP. Three of the four broad categories of indicators used to construct the index deteriorated from a month earlier. The Personal Consumption and Housing category contributed -0.01 in August, down from +0.02 the prior month. The Production and Income category contributed -0.25, down from -0.21 the prior month. The Employment, Unemployment, and Hours category contributed -0.12, down from -0.01 the prior month. The Sales, Orders, and Inventories category contribution was -0.02, up from -0.04 the prior month. Overall breadth of the index was poor with only 33 of the 85 individual indicators making positive contributions, down from just 38 the prior month. 
• Texas factory activity improved in November, with the Texas Manufacturing Outlook Survey up to -2.7 from -3.0 the prior month, missing expectations for a -1.8 reading. It is now the 31st consecutive month with a contractionary reading, but the smallest of the negative readings began in May 2022. Underlying details showed strength in the Outlook index, with the future general business activity index rising to +31.2 from +29.6 the prior month, the highest reading in over three years. The Employment index rose to +4.9 after falling to -5.1 the prior month. The latest reading stands at the highest in four months but remained well below a high of +18.2 in January 2023. The indexes for New Order, Production, and Shipments deteriorated. The Texas Service Sector Outlook General Business Activity Index also improved further, moving further into expansion at +9.8 from +2.0 from the prior month. 
• The Richmond Fed Manufacturing Index was unchanged at -14 in November, missing expectations for an improvement to -11. All three component indexes improved but remain in contraction territory. The Shipments component decreased to -12 from -8 the prior month. The New Orders index, part of the Shipments component, fell to -19 from -17. The Employment index improved to -10 from -17. The future indexes for shipments and new orders also increased further into positive territory, suggesting that many firms expected improvements in the next six months.
• The Commerce Department reported New Home Sales plunged -17.3% in October to a two-year low annual rate of 610,000 units, compared to +7.0% rise the prior month (of 738,000 units annual rate). That was wildly short of expectations for a -1.8% decline to a 725,000 unit annual rate, dragged down by a big drop in demand in the South, which still reflects the effects of hurricanes Helen and Milton. New Home Sales data tend to be volatile month-on-month and are often revised. New-home sales remain far below the recent peak of over 1 million units in August 2020. Year-over-year, sales of new homes were down -9.4% compared to +6.3% the prior month. By region, month-over-month sales were up +53.3% in the Northeast and +1.4% in the Midwest, while down -9.0% in the West and -27.7% in the South. The Median New Home Price rose +4.7% year-over-year to $437,300 from $420,600 the prior month. The inventory of new homes for sale fell -3.8% after rising +6.8% the prior month. The months of supply at the current rate of sales was 9.5, up from 7.7 the prior month.
• The National Association of Realtors (NAR) reported that Pending Home Sales inched up for the third straight month in October, up +2.0% compared to last month’s +7.5% increase and ahead of Wall Street expectations for a -2.0% decline. Year-over-year sales were up +6.6%, better than the +0.2% expected and up from the +2.2% annual pace the prior month. From a regional perspective, all four regions declined from the prior month but remained positive, led by a +4.7% increase in the Northeast and +4.0% rise in the Midwest, while the South and West were relatively flat at +0.9% and +0.2%, respectively. “Home-buying momentum is building after nearly two years of suppressed home sales,” Lawrence Yun, chief economist at the NAR, said in a statement. “Even with mortgage rates modestly rising despite the Federal Reserve’s decision to cut the short-term interbank lending rate in September, continuous job additions and more housing inventory are bringing more consumers to the market,” he added.
• According to the Case-Shiller S&P CoreLogic 20-City Home Price Index, the pace of U.S. housing prices slowed in September but still marked 20 straight monthly increases and a new record high price level. Home prices in the 20 biggest U.S. metropolitan areas increased a seasonally adjusted +0.18%, below expectations for a +0.30 increase and down from a +0.33% increase the prior month (revised down from +0.35%). On a year-over-year (YoY) basis, the 20-city index was up +4.57%, light of expectations for +4.70% and down from the prior month’s +5.21% annual pace. That’s the slowest annual price appreciation since September 2023. New York remained in the top spot over Cleveland, with the biggest year-over-year home-price gains (up +7.5% and +7.1%, respectively). Denver replaced Portland and Tampa as the slowest annual pace (at +0.2% and +1.0% annual rates, respectively). All 20 cities registered annual increases for the tenth consecutive month.
• The competing Federal Housing Finance Agency (FHFA) House Price Index (HPI) showed U.S. home prices increasing in pace in September, up +0.7% after moving up +0.4% the prior month (revised up from the +0.3% originally reported, which is where they were expected to stay). The government data showed home prices up +4.4% year-over-year unchanged from the prior month. All none census divisions posted gains for the month and year. “While house prices continued to increase because housing demand outpaced the locked-in housing supply, elevated house prices and mortgage rates likely contributed to the slowdown in price growth,” said Dr. Anju Vajja, Deputy Director for FHFA’s Division of Research and Statistics.
• Weekly MBA Mortgage Applications rose +6.3% for the week ending November 22, following the prior week’s +1.7% increase. The Purchase Index soared +12.4% following a +2.0% rise the prior week. The Refinance Index slipped +2.6%, following the prior week’s +1.8% rise. The average 30-Year Mortgage Rate slipped to 6.86% from 6.90% the prior week, the first decline after eight straight weeks of increases.
• Weekly Initial Jobless Claims fell -2,000 to 213,000 for the week ending November 23, better than expectations for 215,000 and the lowest level of claims since May. The prior week was revised up to 215,000 from the original 213,000 reported. The number of people already collecting unemployment claims (i.e., Continuing Claims) rose +9,000 to 1,907,000 in the week ending November 16, greater than expectations of 1,892,000. Last week’s reading of 1,908,000 was revised down to 1,898,000.

Asset Class Performance

Source: Bloomberg.

Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 30% US Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4% Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.

* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.