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Briefing.com Summary:
*The rebound in the stock market this week has been aligned with the rebound in rate-cut expectations.
*A boost in Dell (DELL) after its earnings report has been a supportive element for the market.
*The latest initial jobless claims reading is nowhere close to a recession-type reading.
This shortened week of trading is only two days old, and we can already say, "What a week!"
The Philadelphia Semiconductor Index is up 4.8%; the Russell 2000 is up 4.1%; the S&P 500 and Nasdaq Composite have both regained a posture above their 50-day moving averages on a closing basis after breaching that key support level last week; and the CBOE Volatility Index is down 21%.
The biggest and most influential change, however, is that the probability of a 25-basis point rate cut at the December FOMC meeting has risen above 80%, according to the CME FedWatch Tool, after dropping below 40% last week. The correlation between that move and the rebound bid by the stock market, for all intents and purposes, has been 100%.
Rate-cut hopes are the stuff from which bull market dreams are made, so it has been a return to REM stage for many stocks this week.
And the REM stage is looking like where the stock market will open today, notwithstanding some economic reports that could be construed as "less friendly" for the rate cut argument.
Currently, the S&P 500 futures are up 21 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up 110 points and are trading 0.5% above fair value, and the Dow Jones Industrial Average futures are up 109 points and are trading 0.2% above fair value.
Gains in the mega-cap stocks and positive responses to the earnings reports from Dell (DELL), NetApp (NTAP), Autodesk (ADSK), and Urban Outfitters (URBN) have been supportive elements, offsetting weakness in stocks like HP, Inc. (HPQ), Deere (DE), Workday (WDAY), and Zscaler (ZS) after their earnings reports.
The macro element, though, is the one that is principally in play at the moment. Today's data, while a headwind of sorts for rate-cut expectations, has been a tailwind for the view that the economy can avoid a recession.
Initial jobless claims for the week ending November 22 decreased by 6,000 to 216,000 (Briefing.com consensus: 225,000). That is the lowest level of initial claims since April. Continuing jobless claims for the week ending November 15 increased by 7,000 to 1.960 million.
The key takeaway from the report is that initial claims filings are nowhere close to a recession-type level and continue to reflect a generally low-firing environment.
Durable goods orders increased 0.5% month-over-month in September (Briefing.com consensus: 0.3%) following an upwardly revised 3.0% increase (from 2.9%) in August. Excluding transportation, durable goods orders rose 0.6% (Briefing.com consensus: 0.2%) following an upwardly revised 0.5% increase (from 0.4%) in August.
The key takeaway from the report is that business spending, viewed through the lens of nondefense capital goods orders excluding aircraft (+0.9%), showed no signs of slowing, keeping pace with the 0.9% increase seen in August and exceeding the 0.7% growth rate in July.
Treasury yields moved up a bit after the data, but not to any unnerved extreme. The 2-yr note yield went from 3.47% to 3.49%, while the 10-yr note yield climbed from 4.00% to 4.02%.
As a reminder, U.S. markets will be closed tomorrow for Thanksgiving Day. Stocks will resume trading Friday in an abbreviated session that will end at 1:00 p.m. ET.
Happy Thanksgiving!
