Market Insights

Stocks are nearing key highs on optimism the Federal Reserve is finished raising interest rates.

The S&P 500 rose 2.2 percent between Friday, November 10, and Friday, November 17. It was the third consecutive positive week, landing the index back near peaks from the summer. The tech-heavy Nasdaq-100 had its highest weekly close since December 2021.

“In 2023 we may surpass the biggest drop in inflation during peacetime in 100 years,” Chicago Fed President Austan Goolsbee said. He added it was even more impressive to achieve this without a recession or significant job losses. “That’s more than a soft landing.”

Michael Barr, another voting member at the central bank, added that “we’re likely at or near the peak of where we need to be in terms of having a sufficiently restrictive stance of monetary policy.”

They spoke after the consumer price index (CPI) rose less than expected in October. Producer prices, along with export and import prices, were also lower than forecast. Separately, higher initial jobless claims suggested weakness in the labor market.

Those could mean inflation is moderating and the job market is softening. It’s the kind of news that could make central bankers halt rate hikes — or even consider cuts. (See CME’s FedWatch tool below.)

Banks, Real Estate

Last week’s gains were broad, with every major sector advancing. While technology stocks continued to rise, the biggest gainers were stocks that previously fell because of high interest rates. Those included solar energy, regional banks and real-estate investment trusts.

Homebuilders surged on optimism about borrowing costs. They’re the best-performing non-technology stocks on a year-to-date basis, according to TradeStation data.

Traditional retailers also jumped after companies like Target (TGT), Gap (GPS) and Macy’s (M) reported strong earnings.

Walmart (WMT) fell after issuing weak guidance. But even its report might be a positive because CEO Doug McMillon blamed deflationary pressures. It’s also noteworthy that WMT has been a safe-haven that benefited from inflation squeezing shoppers. Its decline, contrasted with gains in less-frugal names like GPS and M, could reflect a healthier consumer.

WMT’s drop made consumer staples the worst-performing sector last week.

Energy stocks, which had previously benefited from inflation, also lagged.

Cisco Systems (CSCO) fell the most in the S&P 500 after warning that orders are slowing because customers have too much inventory.

Charting the Market

The S&P 500 is in the midst of a powerful rally, having advanced 7.6 percent since the end of October. If it stayed here, it would be the the biggest monthly gain since October 2022.

The jump has landed the index near the top of its range from the summer. Its close of 4514 is near the September high, and a peak from two years prior.

Prices have made lower highs while challenging that spot, creating a potential ascending triangle. Some chart watchers may consider that a bullish continuation pattern.

Others may notice how the index broke a falling trendline, potentially signifying a breakout over the weekly time frame.

The Nasdaq-100 could be important. While it’s still below the peaks of July, Friday’s last price was the highest weekly close since December 2021. Its ability to hold those levels may suggest buyers remain in control.

The U.S. dollar also fell last week, which can help risk appetite. (Fewer rate cuts would typically weigh on the greenback and lift foreign currencies.)

Thanksgiving Week

This week is busy, despite being cut short by Thanksgiving on Thursday. Most of the events are on Tuesday and Wednesday.

Tomorrow brings existing home sales in the morning and minutes from the last Fed meeting in the afternoon. There are also earnings from Nvidia (NVDA), Lowe’s (LOW), Best Buy (BBY) and Baidu (BIDU).

Wednesday features durable goods orders, jobless claims and crude-oil inventories. Deere (DE) issues results.

Friday could see activity in the oil market because there’s an OPEC meeting. The stock market also closes at 1 p.m. ET.