Market Insights

Big growth stocks are continuing their rebound as fears dissolve and investors put money to work before yearend.

The S&P 500 rose 1.3 percent between Friday, November 3, and Friday, November 10. The index was little changed for most of the week before clawing above October’s peak on Friday afternoon. Technology stocks like Microsoft (MSFT), Nvidia (NVDA) and Broadcom (AVGO) powered the gains. The Nasdaq-100 closed at its highest level since August 1.

No single event triggered the move. Instead, a series of negatives continued to lift. For one, interest rates remained subdued as oil prices hit their lowest level in almost three months.

Sentiment is also swinging rapidly from pessimism to relief. The weekly survey by the American Association of Individual Investors saw the biggest increase in “bullish” responses (18 percentage points) in 13 years. The percentage of bears (-23 points) fell by the most in over 20 years.

Investors are reacting to lower inflationary pressures and easing geopolitical risks. Crude oil futures (@CL) hit a three-month low and Federal Reserve officials kept their softer tone on monetary policy. Presidents Biden and Xi also agreed to meet at the Asia-Pacific Economic Cooperation summit on Wednesday, calming fears about trade disputes hurting tech.

An even bigger event may come tomorrow, when the Bureau of Labor Statistics releases October’s consumer price index (CPI). Economists forecast an increase of just 0.1 percent from September, which would be one of the smallest changes since inflation accelerated in early 2021. MSFT also holds its Ignite conference on Artificial Intelligence (AI). Investors could also focus on housing data later in the week after mortgage rates had their biggest drop in a year.

Semiconductors Rally

Semiconductors were the biggest gainers last week as enthusiasm about AI continued. NVDA announced new products for the Chinese market, while Advanced Micro Devices (AMD) kept its positive momentum from the previous week. Software companies like MSFT, Adobe (ADBE) and Palantir (PLTR) also climbed.

Energy was the worst-performing sector as investors dismissed fears of supply shocks. Inventories also increased as economic growth shows signs of weakening.

Safe-havens like utilities, health care and precious metals lost value. That may suggest there’s little risk aversion.

TransDigm (TDG), a supplier of aerospace components, and real-estate investment trust Extra Space Storage (EXR) were the biggest individual gainers in the S&P 500 last week. Both reported strong quarterly results.

Illumina (ILMN) and Warn Bros. Discover (WBD) led to the downside after announcing weak numbers.

Charting the Market

The S&P 500 had some potentially important technical achievements last week.

First, it closed above its 50- and 100-day moving averages for the first time in over a month. That may suggest it’s getting more bullish over the intermediate term.

Second, it pushed above a bearish gap after a hawkish Fed meeting on September 20. That zone was resistance last month, so breaking it this month may suggest the bulls are taking charge.

Third, the index remained above its August 2022 peak of 4325. That level was important support earlier in the year, so reclaiming it may be a positive longer-term signal.

Traders may now eye a falling trendline along the peaks of July and August.

The Week Ahead

This week brings inflation data, retail news and housing numbers.

Nothing important is scheduled for today.

The CPI report is at 8:30 a.m. ET tomorrow. Home Depot (HD) also releases quarterly results and MSFT’s AI conference begins.

Wednesday features retail sales, the producer price index (PPI) and crude-oil inventories. Earnings are due from Target (TGT), TJX (TJX), Cisco Systems (CSCO) and Palo Alto Networks (PANW).

Thursday’s brings initial jobless claims and NAHB’s homebuilder sentiment index. Walmart (WMT), Alibaba (BABA), Applied Materials (AMAT) and Gap (GPS) issue results.

The week concludes with housing starts and building permits on Friday morning.