Wall Street bulls made a valiant effort and sent the stock market soaring on Friday thanks to a double dose of encouraging news. But the rally wasn’t enough to overcome Wednesday’s Fed-driven decline. The S&P 500 fell 2% for the second week in a row, while the Dow Jones Industrial Average was down three weeks in a row, losing more than 2.2%. The Nasdaq fell 1.8% weekly, snapping a four-week winning streak. Looking within the S&P 500, despite Friday’s gains, all sectors closed down for the week. Energy was the worst performing sector followed by real estate and materials. Investors received several important updates this week that impacted the market – the most consequential being the Fed’s 25-basis-point interest rate cut at the conclusion of its two-day December meeting on Wednesday afternoon. While the move was largely expected, the market took issue with the Monetary Policy Committee’s more dovish approach on a rate cut in 2025. The so-called dot plot, which shows central bankers’ future rate expectations, pointed to the committee’s consensus that it would be appropriate to lower rates only twice next year, half the number of moves indicated in September. There is no denying that rate expectations are important, but we would caution club members from allowing such updates to have too much of an impact on investment decisions. While we now know who will be sitting in the White House on Inauguration Day on January 20, and have received more updates on inflation and the job market since then, no one really knows what 2025 will bring. There will be countless updates on inflation, rates, geopolitics and more in the coming months, some of which we may have seen coming and some that will completely surprise us. The Fed, as it has been and as it should, will adjust its approach accordingly. While we certainly don’t want to fight the Fed, we also don’t want every word out of a Fed official’s mouth leading us to our brokerage account and drastically changing our exposures. Rather, as long-term investors, we have the luxury of knowing when the market may overreact to an update from the Fed or some other event, which can provide us with opportunities to buy shares in strong companies. According to our reliable S&P 500 Short Range Oscillator, that’s what we did last week as the market was selling off more and more. In other words, stay focused on the fundamentals and use volatility to your advantage. The second major update came Friday, which included a lower-than-expected personal consumption expenditures (PCE) price index, the Federal Reserve’s favorite inflation gauge. Headline November PCE saw a 2.4% rise compared to an expected 2.5% gain. Excluding volatile food and energy prices, core PCE increased 2.8% year on year, compared to the expected 2.9% increase. .DJI .SPX, .IXIC 5D Mountain 2024-12-14 Dow, S&P 500, Nasdaq performance last week While still above the Fed’s 2% target inflation rate, PCE data was exactly what the oversold market needed , and it was off to the races, turning sharp premarket losses into Friday’s powerful rally. Helping push the market to another high, Chicago Fed President Austin Goolsbee told CNBC in an interview on Friday that if the economic conditions of the past 18 months continue over the next 12 to 18 months, “rates will be quite low.” Come down to the limit”. Goolsby’s comments calmed jittery markets after Fed Chairman Jerome Powell’s sharp remarks at a post-meeting news conference on Wednesday. Needless to mention, if rates stay high for a long time, that’s not a bad thing at all because it almost certainly means the economy is still growing, and we’re in a market struggling with higher rates. Would prefer to stay because the economy is stronger than one Low rates are benefiting the market as the economy struggles to avoid a recession. In other economic news last week, retail sales in November were mixed, with headline numbers exceeding expectations. However, the results were lower when separating automotive and gasoline sales. November industrial production and capacity utilization fell short of expectations. The third and final report on third-quarter gross domestic product was better than expected. In the release, the Bureau of Economic Analysis said the updated GDP, which measures U.S. economic activity, “primarily reflected upward revisions in exports and consumer spending that were partially offset by a downward revision in private inventory investment.” The calculation of imports, which is a subtraction, was revised.” Housing starts were disappointing in November, but existing home sales in November exceeded expectations. Within the portfolio, no companies reported earnings, however, we initiated a new position in Goldman Sachs while trimming and downgrading Morgan Stanley to a 3 rating. As noted in Thursday’s Trade Alert, we have begun to make changes because Goldman Sachs’ exposure to investment banking is much more significant than Morgan Stanley’s exposure – and if capital markets activity picks up over the next few years We would like to see that happen, as many analysts expect. Invest with the highest quality investment banks. We also chose to reduce our position in Advanced Micro Devices to a rating of 3. While it was initially thought that AMD would prove to be the winner as it provides an alternative to club name Nvidia, what we are now seeing is that Nvidia is even more deeply established than we thought and when companies look for alternatives. If they are, they focus more on custom. Chip solutions, such as those made by Broadcom and Marvell Technology, compared to common GPU options. While we like Broadcom for the long term, we trimmed and downgraded the stock after its decline following last week’s strong earnings. Looking ahead, it will be a light week with the stock market closing at 1 pm ET on Tuesday and remaining closed all day on Wednesday for Christmas Day. As noted, sales of new homes in November will take place on Tuesdays. Housing reports have been and will continue to be a key monitored item for investors, given that shelter cost inflation has proven extremely sticky and a major source of upward pressure on inflation, which in turn is keeping rates high. However, investors should take any positive updates from Tuesday’s report with caution. Mortgage rates rose again after the Fed’s rate announcement on Wednesday, and investors are going to be more focused on figuring out what this means for home sales and affordability than this backward-looking release. . Upcoming Week Monday, Dec. 23 at 10 a.m. ET: Consumer Confidence Tuesday, Dec. 24 at 8:30 a.m. ET: Durable Goods Orders at 10 a.m. ET: New Home Sales U.S. stock markets close at 1 p.m. ET, Wednesday , December 25 U.S. stock markets closed for Christman’s Day, Thursday, December 26, at 8:30 a.m. ET: Initial Jobless Claims, Friday, December 27, at 8:30 a.m. ET ET: Bulk List (See here for a complete list of shares in Jim Cramer’s charitable trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after a trade alert is sent before buying or selling stocks in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after the trade alert is issued before executing the trade. The above Investment Club information is subject to our disclaimer as well as our terms and conditions and privacy policy. No fiduciary obligation or duty exists, or is created, by virtue of your receipt of any information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
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Wall Street bulls made a valiant effort and sent the stock market soaring on Friday thanks to a double dose of encouraging news. But the rally wasn’t enough to overcome Wednesday’s Fed-driven decline.
