Market Recap - MARKET BREAKS WINNING STREAK TO START 2024

The Stock Market Registered Losses Following Nine-Straight Weeks Of Gains To Close Out 2023.

Profit-taking activity in the mega cap stocks, and other stocks that outperformed last year, contributed to the downbeat price action. 

Apple was a standout loser, dropping nearly 6.0%, after two analyst downgrades and news that the DOJ is getting close to filing an antitrust case against Apple, according to The New York Times.

Notably, areas of the market that held up better this week compared to mega caps were either left out of the last year's gains or saw less robust gains than the mega cap stocks. The Russell 3000 Growth Index sank 2.8% versus a 0.6% decline in the Russell 3000 Value Index.

The only three S&P 500 sectors to register a decline in 2023 saw some of the largest gains this week. The utilities sector, which fell 10.2% last year, logged a 1.8% gain this week. The energy sector, which declined 4.8% in 2023, climbed 1.1% this week. The consumer staples sector, which fell 2.2% last year, closed with a 0.03% gain this week. 

The health care sector was another top performer, registered a 2.1% gain. It was also among the worst performing sectors last year, eking out a 0.3% gain.

Meanwhile, the heavily-weighted information technology (-4.1%) and consumer discretionary (-3.5%) sectors saw the largest declines after outperforming last year.

In addition to profit-taking activity, rising market rates also contributed to the negative bias this week after the 10-yr yield passed 4.00%. The 10-yr note yield climbed 16 basis points to 4.04% and the 2-yr note yield rose 14 basis points to 4.39%.

The price action in Treasuries was partially due to a recalibration of rate-cut expectations after the Minutes from the December 12-13 FOMC meeting were less dovish than hoped. In discussing the policy outlook, the committee viewed the policy rate as likely at or near its peak for this tightening cycle. The Fed made it clear, however, that it isn't divorcing itself entirely from the idea that it might still have to raise rates again.

Some economic releases on Friday added to the rate-cut uncertainty. The December Employment Situation Report featured better than expected nonfarm payrolls, average hourly earnings, and a steady unemployment rate versus expectations for an increase. The December ISM Services PMI showed a larger than expected deceleration in December service sector growth. 

The solid employment numbers may keep the Fed from cutting rates as much as the market had expected, whereas the soft reading for business activity in the nation's largest sector would perhaps keep the Fed aligned with the market's rate-cut expectations.

The probability of a 25 basis points rate cut to 5.00-5.25% at the March FOMC meeting is 68.3% versus 88.5% last week.

In other news, geopolitical worries intensified in the Red Sea after Iran sent a warship there in response to the U.S. destroying three Houthi boats.

• Dow Jones Industrial Average: -0.6% for the week / -0.6% YTD

• S&P 500: -1.5% for the week / -1.5% YTD

• S&P Midcap 400: -2.5% for the week / -2.5% YTD

• Nasdaq Composite: -3.3% for the week / -3.3% YTD

• Russell 2000: -3.8% for the week / -3.8% YTD

Market Recap - MARKET CLOSES 2023 WITH NINE-WEEK WIN STREAK

The Three Major Indices Closed 2023 With A Nine-Week Win Streak.

Participation was below-average throughout most of the week as investors looked ahead to another extended holiday weekend. Markets will be closed on Monday for New Year's Day.

Another factor that kept participation light was understanding that stocks have made big moves higher since October, which had the S&P 500 approaching its all-time high close (4,796.56) this week. The S&P 500 reached 4,793.30 at its high on Thursday, but backed off by the close and logged a slim decline on Friday.

Small cap stocks underperformed this week, leaving the Russell 2000 down 0.3%. That loss leaves the index up 12.1% in December and 15.1% this year. The S&P 500 and Nasdaq Composite registered gains of 4.4% and 5.5%, respectively, in December, which leaves them up 24.2% and 43.4%, respectively, for the year.

Four of the S&P 500 sectors declined this week while seven sectors logged gains. The energy sector (-1.4%) was the worst performer by a decent margin, followed by the consumer discretionary (-0.4%) and communication services (-0.4%) sectors. Meanwhile, the utilities (+1.1%) and consumer staples (+1.1%) sectors saw the largest gains.

Only three sectors declined in 2023 -- utilities (-10.2%), energy (-4.8%), and consumer staples (-2.2%) -- while the information technology (+56.4%), communication services (+54.4%), and consumer discretionary (+41.0%) sectors saw the biggest gains by far thanks to their mega cap constituents.

Notably, the 10-yr note yield closed the year unchanged at 3.88% after reaching an intraday high yield of 5.02% in mid-October. The 2-yr note yield declined 17 basis points this year to 4.25%.

• Nasdaq Composite: +0.1% for the week / +43.4% YTD

• S&P 500: +0.3% for the week / +24.2% YTD

• Russell 2000: -0.3% for the week / +15.1% YTD

• S&P Midcap 400: -0.2% for the week / +14.5% YTD

• Dow Jones Industrial Average: +0.8% for the week / +13.7% YTD

Market Recap - ANOTHER WINNING WEEK AHEAD OF THE HOLIDAY WEEKEND

The Market Logged Its Eighth Straight Week Of Gains Ahead Of The Extended Holiday Weekend.

That didn't alter the stock market's prevailing disposition, however. It was another winning week for the major indices, which were supported by some generally broad‐based buying interest.

The same factors that fueled the big run off late October lows were in play this week. Namely, a drop in market rates, an optimistic outlook on the economy, a fear of missing out on further gains, and an increase in speculative trading in the absence of concerted selling activity. The last factor drove the outperformance of the Russell 2000, which climbed 2.5% this week.

Gains were relatively broad‐based, leaving ten of the 11 S&P 500 sectors higher for the week. The lone sector that declined 1.3% was the rate‐sensitive utilities sector. Meanwhile, the communication services sector registered the biggest gain by a wide margin (+4.1%), benefitting from outsized gains in its largest components. Meta Platforms (META) jumped 5.5% this week and Alphabet (GOOG) increased 6.6%.

The next best performing sectors were the economically sensitive energy (+1.7%) and materials (+1.1%) sectors, reflecting the positive sentiment around the economic outlook.

Micron (MU) was an individual winner of note after better‐than‐expected earnings results and guidance. On the flip side, FedEx (FDX) and NIKE (NKE) both registered big losses on the week after disappointing with guidance. The overall market wasn't too worried about the disappointing guidance from some individual stocks, though.

Economic data remains consistent with a soft landing scenario for the economy. The November Personal Income and Spending report showed a healthy 0.4% increase in real disposable personal income, a 0.3% increase in real spending, and disinflation in both the PCE and Core PCE Price Indexes (the Fed's favored inflation gauge).

Housing starts were much stronger than expected in November, consumer confidence increased in December, and the level of initial claims is still a long way from being associated with levels registered during a recession.

Continued buying interest in the Treasury market was partially in response to economic data. The 2‐yr note yield settled ten basis points lower this week at 4.33%. The 10‐yr note yield declined two basis points this week to 3.90%.

Activity in the Treasury market was also supported by some safe‐haven trading after geopolitical angst was stirred this week. Specifically, several shipping companies, including BP, rerouted ships away from the Red Sea because of attacks on vessels by Houthi militants.

As a reminder, markets are closed on Monday for Christmas Day.

• Nasdaq Composite: +1.2% for the week / +43.3% YTD

• S&P 500: +0.8% for the week / +23.8% YTD

• Russell 2000: +2.5% for the week / +15.5% YTD

• S&P Midcap 400: +1.5% for the week / +14.7% YTD

• Dow Jones Industrial Average: +0.2% for the week / +12.8% YTD

Market Recap - Dovish Fed Induces Market Rally

It Was A Busy Week For The Stock Market That Left The Major Indices With Solid Gains.

The Dow Jones Industrial Average closed at a new record high on Thursday, building on that during Friday's session, while the S&P 500 closed above 4,700 at its highest level since January 2022.

Friday's close marked seven consecutive winning weeks for the major indices. 

Stocks surged after the market learned that the FOMC voted unanimously to leave the target range for the fed funds rate unchanged at 5.25-5.50%. This was accompanied by an updated Summary of Economic Projections that featured an improved growth outlook for 2023, a lowered inflation outlook for 2023 and 2024, and a median estimate of three rate cuts in 2024 versus a previous estimate of two rate cuts.

Fed Chair Powell also acknowledged in his press conference that the FOMC discussed when it will become appropriate to begin dialing back its policy restraint. Notably, however, New York Fed President Williams (FOMC voter) in a CNBC interview seemingly contradicting Mr. Powell's remarks. He said that the Fed isn't really talking about rate cuts right now and that it is premature to think about the timing of rate cuts.

Atlanta Fed President Bostic (2024 FOMC voter) told Reuters, meanwhile, that he expects two rate cuts in 2024, starting in the second half of the year.

The fed funds futures market had been pricing in two rate cuts in 2024 ahead of the FOMC meeting, but it is now pricing in six (!) rate cuts for 2024 with the first cut coming in March.

Other central banks followed the Fed's lead and left their respective rates unchanged, too. The ECB left its corridor of key policy rates unchanged, as expected, along with the Bank of England, the Swiss National Bank and Hong Kong Monetary Authority. Notably, however, ECB President Lagarde and officials at other banks indicated that they are further away from rate cuts after Fed Chair Powell disclosed that the FOMC had began discussing rate cuts.

The Treasury market also had a strong rally in response to the Fed's dovish pivot. The 2-yr note yield dropped 28 basis points to 4.46% and the 10-yr note yield plunged 30 basis points to 3.93%. The 10-yr note yield falling below 4.00% acted as added support for equities this week.

Just about everything came along for the upside ride in the stock market. Only one of the S&P 500 sectors registered a loss -- communication services (-0.1%) -- while the rate-sensitive real estate sector jumped 5.3%. 

Other top performing sectors included materials (+4.0%), consumer discretionary (+3.5%), and industrials (+3.6%).

Economic data was mostly consistent with the soft landing narrative. The November Consumer Price Index was mostly in-line with expectations, although core CPI was somewhat sticky, while the November Producer Price Index showed some welcome disinflation. Retail sales rebounded in November from a slump in October and weekly jobless claims are still running below recession levels.

The latter half of the week featured heavier-than-normal volume at the NYSE and Nasdaq due in part to a huge quarterly options and futures expiration on Friday. Increased activity was also related to a rebalance of the S&P 500 and Nasdaq 100.

• Nasdaq Composite: +2.9% for the week / +41.5% YTD

• S&P 500: +2.5% for the week / +22.9% YTD

• Dow Jones Industrial Average: +2.9% for the week / +12.5% YTD

• S&P Midcap 400: +4.3% for the week / +13.0% YTD

• Russell 2000: +5.6% for the week / +12.7% YTD

Market Recap - MARKET CLOSES FLATTISH AMID CROSSCURRENTS

The Major Indices Closed The Week With Modest Gains.

There was not a lot of conviction from either buyers or sellers due in part to a growing sense that the market is overbought on a short-term basis. For the S&P 500, Friday's close at 4,604 marked an 11.8% rise off its October 27 low (4,117) and set a new 52-week high for the index. 

Alphabet was a winning standout from the space, gaining 2.5% on the week after jumping more than 5.0% during Thursday's session following its Gemini AI model reveal.

That more helped propel the communication services sector to a 1.4% gain this week. The consumer discretionary sector was another top performer, climbing 1.1%. Meanwhile, the energy sector saw the largest decline (-3.3%) as oil prices dropped 3.5% to $71.18/bbl. The materials (-1.7%) and consumer staples (-1.3%) sectors also registered noticeable declines. 

Market participants were dealing with some crosscurrents this week. Renewed concerns about global growth emerged after Moody's downgraded China's credit outlook to Negative from Stable, which was tied in part to concerns about structurally weaker growth prospects, and the October JOLTS - Job Openings Report showed the lowest number of job openings (8.733 million) since March 2021.

Other economic data, however, fit with the soft-landing narrative for the economy. That was good news for earnings, but may be bad news for rate-cut expectations. The ISM Non-Manufacturing Index for November rose to 52.7% from 51.8%, the weekly jobless claims numbers remain consistent with a robust labor market, the November Employment Situation report was deemed solid overall, and the preliminary University of Michigan Index of Consumer Sentiment for December was stronger than expected. 

The fed funds futures market is no longer pricing in a rate cut in March following this week's data, but it still sees a strong likelihood of a cut in May (78.5% on Friday), according to the CME FedWatch Tool.

Treasuries settled the week with losses, largely in response to the release of the jobs report on Friday. The 2-yr note yield climbed 18 basis points to 4.74% and the 10-yr note yield rose two basis points to 4.25%. This price action put some renewed pressure on the 2s10s spread, which tightened by 16 bps to -49 bps.

In other news, cryptocurrencies made big moves higher this week, leaving Bitcoin at $44,241.

• Nasdaq Composite: +0.7% for the week / +37.6% YTD

• S&P 500: +0.2% for the week / +19.9% YTD

• Dow Jones Industrial Average: UNCH for the week / +9.4% YTD

• S&P Midcap 400: +0.3% for the week / +8.3% YTD

• Russell 2000: +1.0% for the week / +6.8% YTD

Market Recap - YIELDS FALL, RATE CUT EXPECTATIONS RISE, AND STOCKS REGISTER GAINS

The Stock Market Closed Out The Month Of November With Solid Gains And Began The Month Of December On A Positive Note.

Friday's close marked a new 52-week high for the S&P 500, which brushed up against the 4,600 level at its high of the day.

Only two of the S&P 500 sectors logged a decline, communication services (-2.5%) and energy (-0.1%). The rate-sensitive real estate sector (+4.6%) saw the biggest gain, followed by materials (+2.6%), industrials (+2.1%), and financials (+2.1%).

There was likely some fear of missing out on further gains in this seasonally strong period for the market contributing to the positive action this week, but the biggest driving factors were interest rates and rethinking rate cuts in the first half of 2024.

The 2-yr note yield, which is most sensitive to changes in the fed funds rate, plunged 39 basis points this week to 4.56%. The 10-yr note yield declined 24 basis points to 4.23%. 

Also, the fed funds futures market now sees a much higher probability of a rate cut in May (89.0%) compared to one week ago (47.8%), according to the CME FedWatch Tool.

Some Fed officials pushed back on the idea that rate cuts will occur in the first half of 2024, but that did not deter investors. Richmond Fed President Barkin (2024 FOMC voter), Fed Governor Bowman (FOMC voter), and Fed Chair Powell all made comments this week indicating that they believe it is premature to talk rate cuts.

Investors received a slate of economic data this week that continue to look consistent with a soft landing scenario for the economy. Notable releases included: a stronger than expected November Consumer Confidence Index, an upward revision to Q3 real GDP to 5.2% from 4.9%, a moderation in income and spending, and disinflation in the PCE Price Indexes in October, a much stronger-than-expected Chicago PMI for November, and a relatively low level of initial jobless claims.

Market participants were also digesting more earnings news that was generally met with positive responses. Some of the most notable earnings news was the better-than-expected results from software enterprise names such as Snowflake and Elastic. Dow component Salesforce was another big winner after reporting earnings.

In other news, several OPEC+ countries confirmed additional voluntary cuts to the total of 2.2 million barrels per day, beginning January 1 through the end of March 2024. WTI crude oil futures declined 1.5% this week to $74.07/bbl.

• Nasdaq Composite: +0.4% for the week / +36.7% YTD

• S&P 500: +9.6% for the week / +19.7% YTD

• Dow Jones Industrial Average: +2.4% for the week / +9.4% YTD

• S&P Midcap 400: +2.6% for the week / +8.0% YTD

• Russell 2000: +3.1% for the week / +5.8% YTD

Market Recap - MARKET MAINTAINS POSITIVE‐MINDED DISPOSITION

There Was One Less Trading Day This Week Because Of The Thanksgiving Day Holiday On Thursday And Trading Volume Was On The Lighter Side.

That didn't alter the stock market's prevailing disposition, however. It was another winning week for the major indices, which were supported by some generally broad‐based buying interest.

To be fair, the mega‐cap stocks led the show again. The Vanguard Mega‐Cap Growth ETF (MGK) gained 1.2% this week, yet the Invesco S&P 500 Equal‐Weight ETF (RSP) gained 1.0%.

Every S&P 500 sector finished higher. The best‐performing sectors were the health care (+2.2%), consumer staples (+1.4%), and communication services (+1.3%) sectors. The relative laggards were the energy (+0.3%), utilities (+0.6%), and information technology (+0.6%) sectors.

NVIDIA (NVDA) was a key story stock during the week. The AI chip giant reported its quarterly results after the close on Tuesday. They were blowout results yet again, but there was some chatter about investors being disappointed that the company lacked visibility into how the export curbs to China will ultimately impact its sales in coming quarters. On Thursday, Reuters reported that NVIDIA is going to be delaying its China AI chip.

In its defense, NVIDIA was ripe for a pullback on just about any news. It had rallied 25% from its October 26 low going into its report. One could also make a case, then, that its soft finish to the week might have been a case of selling on the news more than genuine disappointment about its sales visibility in China, especially since the company also said the affected sales from U.S. export curbs are being more than offset by growth in other regions.

Tellingly, NVIDIA's soft finish did not derail the broader market on Wednesday or Thursday. There was continued resilience to the idea that the stock market is overbought and due for a pullback. That resilience continued to feed a fear of missing out on further gains that propped up the indices along with the continued belief that the Fed is done raising rates.

That belief drowned out a view in the FOMC Minutes for the October 31‐November 1 meeting that suggested the Fed would raise rates again if it felt that was necessary. That wasn't anything the market hadn't heard already, so it was more of a headline talking point for the market than a market mover.

There was a batch of earnings results out of the retail space this week that moved plenty of individual stocks, including Dick's Sporting Goods (DKS), Nordstrom (JWN), Best Buy (BBY), Kohl's (KSS), Lowe's (LOW), Burlington Stores (BURL), and American Eagle Outfitters (AEO) to name a few. Collectively, the results were digested in a mostly positive manner. The SPDR S&P Retail ETF (XRT) gained 1.0% for the week.

The economic data this week had some mixed hues. Specifically, existing homes sales in October transpired at the slowest annual pace (3.79 million) since August 2010 while initial jobless claims for the week ending November 18 decreased by 24,000 to a surprisingly low 209,000.

For the week, the 2‐yr note yield increased five basis points to 4.95% and the 10‐yr note yield increased three basis points to 4.47%.

Next week will feature an important slate of economic data that includes October New Home Sales, November Consumer Confidence, the second estimate for Q3 GDP, October Personal Income and Spending, which will include the PCE Price Indexes, Initial Jobless Claims, and the November ISM Manufacturing Index.

In turn, the earnings calendar will feature some high‐profile earnings reporters, namely Zscaler (ZS), CrowdStrike (CRWD), Hewlett Packard Enterprise (HPE), Intuit (INTU), NetApp (NTAP), Workday (WDAY), Dollar Tree (DLTR), Foot Locker (FL), Five Below (FIVE), Okta (OKTA), PVH (PVH), Salesforce (CRM), and Snowflake (SNOW).

• Nasdaq Composite: +0.9% for the week / +36.2% YTD

• S&P 500: +1.0% for the week / +18.7% YTD

• Dow Jones Industrial Average: +1.3% for the week / +6.8% YTD

• S&P Midcap 400: ++0.9% for the week / +5.3% YTD

• Russell 2000: +0.5% for the week / +2.6% YTD

Market Recap - ANOTHER WINNING WEEK AFTER PLEASING BATCH OF DATA

It Was Another Winning Week For The Stock Market. The S&P 500, Which Flirted With 4,100 In Late October, Closed Above The 4,500 Level On Friday.

The positive bias was partially driven by a recognition that there wasn't a lot of selling activity after the big run, along with a fear of missing out on further gains during a seasonally strong time of year for the market. 

Mega cap stocks contributed to index performance, but the broader market experienced more robust buying interest.

The bulk of this week gains followed the October Consumer Price Index on Tuesday, which corroborated the notion that the Fed is done raising rates. That report, along with the October Producer Price Index, the October Retail Sales, the weekly initial jobless claims, and the October Housing Starts data, all seemed consistent with a soft landing scenario for the economy.

The fed funds futures market priced out the probability of any additional rate hikes by the Fed, and now sees a 61.7% probability of the first rate cut in May 2024, according to the CME FedWatch Tool.

Treasury yields took a sharp turn lower in response to the data and the idea that the Fed is done raising rates. The 2-yr note yield fell 15 basis points this week to 4.90%. The 10-yr note yield declined 19 basis points to 4.44%.

The rate-sensitive S&P 500 sectors registered some of the largest gains, but all 11 sectors traded higher this week. The real estate (+4.5%), financials (+3.3%), and utilities (+3.0%) sectors were standouts in that respect. The consumer staples (+0.6%) and energy (+0.9%) sectors were the only ones to gain less than 1.0%. 

Market participants were digesting another batch of earnings news. Walmart and Target headlined the calendar, both making mention of a more cautious-minded consumer. Still, Target registered a big gain after reporting results. Gap, Ross Stores, and Macy's were also standout winners after reporting earnings. 

Leading chip equipment maker Applied Materials also reported earnings and logged a decline following a Reuters report that it is the subject of a DOJ criminal probe over shipments to China's top chipmaker, SMIC.

In other news, Congress passed a continuing resolution to avoid a government shutdown, and President Biden and President Xi agreed to resume high-level, direct military talks, and bilateral cooperation in combating global illicit drug manufacturing and trafficking.

Looking ahead, markets will be closed on Thursday and close at 1:00 p.m. ET on Friday in observance of Thanksgiving. 

• Nasdaq Composite: +2.4% for the week / +35.0% YTD

• S&P 500: +2.2% for the week / +17.6% YTD

• Dow Jones Industrial Average: +1.9% for the week / +5.4% YTD

• S&P Midcap 400: +4.0% for the week / +4.4% YTD

• Russell 2000: +5.4% for the week / +2.1% YTD

Market Recap - MEGA CAPS SUPPORT INDEX GAINS AS RATES RISE

The Market Had A Decent Showing This Week On The Heels Of Last Week's Big Gains.

Market participants were digesting another heavy flow of earnings news, but that news was largely overshadowed by moves in the mega cap stocks.

The broader market showed nice resilience to selling efforts despite many participants thinking stocks are due for a pullback. The S&P 500 is now up 7.2% from its low close on October 27.

Small and mid cap stocks were an exception, relenting to some selling pressure this week. The Russell 2000 fell 3.2% and the S&P Mid Cap 400 declined 1.6%.

Six of the 11 S&P 500 sectors logged a gain this week. The heavily-weighed information technology (+4.8%) and communication services (+2.2%) sectors were the best performers followed by consumer discretionary (+0.9%). The energy (-3.8%), utilities (-2.6%), and real estate (-2.1%) sectors saw the biggest declines.

A jump in market rates following some Treasury auctions this week, along with commentary from Fed Chair Powell, slowed the rebound momentum for the broader market. The 2-yr note yield climbed 19 basis points this week to 5.05%. The 10-yr note yield rose seven basis points this week to 4.63%.

Sales of 3- and 10-yr notes on Tuesday and Wednesday, respectively, met okay enough demand for the stock market, but Thursday's 30-yr bond auction was met with dismal demand. 

There were several Fed officials speaking this week, but the market was mostly focused on Fed Chair Powell's IMF panel discussion on Thursday. Mr. Powell largely reiterated his remarks from November 1, saying "If it becomes appropriate to tighten policy further, we will not hesitate to do so."

• Nasdaq Composite: +2.4% for the week / +31.8% YTD

• S&P 500: +1.3% for the week / +15.0% YTD

• Dow Jones Industrial Average: +0.7% for the week / +3.4% YTD

• S&P Midcap 400: -1.6% for the week / +3.1% YTD

• Russell 2000: -3.2% for the week / +2.6% YTD

Market Recap - STOCKS RALLY ON SHARP DROP IN RATES

The Stock Market Registered Sizable Gains On The Heaviest Week Of Earnings Reporting For This Q3 Season.

The calendar featured results from Apple, which didn't live up to the market's high expectations and  languished following its report. Earnings news was generally met with a positive reaction, helped in large part by the significant drop in market rates.

The 10-yr note yield declined 31 basis points this week to 4.51% and the 2-yr note yield fell 17 basis points this week to 4.86%. Those moves were partially a reaction to the following factors:

• The Bank of Japan's tweak to its yield curve control policy was not as hawkish as feared, tempering concerns about the possibility of a destabilizing unwinding of carry trades.

• The Treasury reduced its Q4 borrowing estimate by $76 billion to $776 billion.

• The Treasury said its Q4 refunding would involve larger issuance and auction sizes for 2-, 3-, 5-, and 7-yr maturities than 10-, 20-, and 30-yr maturities.

• Short sellers covered their positions.

Another important factor driving activity in the Treasury market was the FOMC meeting. The committee voted unanimously to leave the target range for the fed funds rate unchanged at 5.25-5.50% and Fed Chair Powell's press conference was deemed less-hawkish than feared. Mr. Powell noted that the Fed has come very far with its rate-hike cycle and that policy decisions have gotten more two-sided. 

The Bank of England also left its key rate unchanged, although the vote was 6-3 with three voters favoring a 25 basis points rate hike.

Some of the key economic releases this week all worked in favor of the market's thinking that the Fed could be done raising rates. The ISM Manufacturing Index contracted at a faster pace in October (actual 46.7%; expected 49.0%; prior 49.0%), Q3 unit labor costs declined 0.8% on the back of the strongest productivity increase (4.7%) since the third quarter of 2020, and the October jobs report showed slower payroll growth, rising unemployment, and slower wage growth.

The fed funds futures market isn't pricing in any more rate hikes over the next 12-month horizon; in fact, it is pricing in at least two rate cuts over the next 12 months, according to the CME FedWatch Tool.

The sharp drop in rates acted as a springboard for stocks, aided by short-covering activity and a fear of missing out on further gains in a seasonally strong period for the market. Last week brought the S&P 500 into technical correction territory, but this week's rally brought the S&P 500 back above both its 200-day and 50-day moving averages.

The rate-sensitive real estate sector was the best performer, up 8.6%, followed by the financial (+7.4%), consumer discretionary (+7.2%), and information technology (+6.8%) sectors. The "worst" performing sector was energy, which still climbed 2.3% this week. 

The US dollar was weaker this week due to the thinking that the Fed might be done raising rates. The US Dollar Index fell 1.4% to 105.04.

• Nasdaq Composite: +6.6% for the week / +28.8% YTD

• S&P 500: +5.9% for the week / +13.5% YTD

• Dow Jones Industrial Average: +5.1% for the week / +2.8% YTD

• S&P Midcap 400: +6.5% for the week / +2.0% YTD

• Russell 2000: +7.6% for the week / -0.03% YTD