Although US equities were divided on Thursday, investors continued to bet on interest rate reduction following a significant reading on consumer inflation, and the S&P 500 (\GSPC) and Dow Jones Industrial Average (\DJI) closed higher to close their best month of the year.
With a gain of almost 500 points, or roughly 1.5%, the Dow Jones Industrial Average outpaced gains and set a new closing high for 2023. With previous losses reversed, the S&P 500 gained about 0.4%, while the tech-heavy Nasdaq Composite (^IXIC) dropped 0.2%. By the end of November, 2023, all three main averages had achieved their largest monthly advances to date.
Hopes that the Federal Reserve will stop raising interest rates drove November’s massive rise.
The Fed’s favourite inflation gauge, the PCE index, was released on Thursday, and it showed that inflation fell to its lowest levels since 2021, as expected. This gave equities a boost. The data may strengthen the argument that the Fed is done raising rates for this cycle and may lower rates sooner than previously anticipated.
Additionally, the unexpected November decline in euro zone inflation to 2.4% on Thursday was perceived as a challenge to the view taken by the European Central Bank that price increase is unyielding.
The agreement by OPEC+ to further cut output by one million barrels per day caused oil prices to spike, but the paucity of details raised doubts about each nation’s commitment. Brent (BZ=F) oil futures dropped to below $83, while WTI (CL=F) dropped about 3% to trade below $76 per barrel.
Although the S&P 500 (\GSPC) and Dow Jones Industrial Average (\DJI) had their biggest monthly gains since 2022, stocks ended November’s trading day mixed.
With a rise of over 1.5%, or more than 500 points, the Dow Jones Industrial Average led the gains, while the tech-heavy Nasdaq Composite (^IXIC) dipped 0.2% and the S&P 500 jumped about 0.4%.
With its largest monthly increase in almost a year, the S&P 500 is expected to end November on high note. The good news for investors is that this suggests that stock performance going forward will probably be better than average.
According to research by Callie Cox of eToro, if the S&P 500’s one-month rolling return exceeds 9.2%—a level that the benchmark average achieved earlier this week—the outlook is often better.
In the twelve months after a run like the latest stock market surge, equities gain, on average, 14.9%. The S&P 500 has an average return of 8.7% on anything less.
“Momentum begets momentum in the stock market, that can work in the bulls’ favour,” Cox stated.
On Thursday, ImmunoGen (IMGN) topped the Yahoo Finance trending tickers page. After pharmaceutical company AbbVie (ABBV) decided to spend more than $10 billion in ImmunoGen’s cancer therapy, shares shot up more than 80%.
The shares of Nvidia (NVDA) fell almost 3% during the day, while the whole tech sector (XLK) also declined.
Following the release of the company’s better-than-expected quarterly earnings, shares of Snowflake (SNOW) increased by almost 7%. The business announced sales forecast for the current quarter that was much higher than Wall Street’s $696 million projections, ranging from $716 million to $721 million.
In addition, Salesforce (CRM) shares surged, jumping almost 8% in response to better-than-expected results. Salesforce beat Street projections for adjusted profits per share for the current quarter, guiding for a range of $2.25 to $2.26 per share.
The ferocious November surge has revived some investors’ least preferred bets. This covers the conventional 60 percent stock and 40 percent bond asset allocation strategy.
We pointed out that the 60/40 portfolio was going through one of its worst periods in recent memory around a month ago.
This month, that has changed as the S&P 500 and Bloomberg Aggregate Bond Index increased 7.3% together in November. That’s “the best showing for 60/40 since 2020, the second-best in over 30 years, and a top ten all-time showing,” according to Bespoke Investment Group.
On November’s last trading day, as the S&P 500 and Nasdaq attempt to cap off their greatest month since July 2022, stocks are divided.
With a rise of over 250 points, or 0.7%, the Dow Jones Industrial Average (^DJI) led advances, while the tech-heavy Nasdaq Composite (^IXIC) dropped more than 0.6% and the S&P 500 (^GSPC) dipped 0.1%.
In a news release issued on Thursday morning, the activist hedge fund stated that although Disney had offered Trian a meeting with the board, it had declined its latest request for representation, which included Peltz. The company declared that it will now present its case to shareholders directly.
A person with knowledge of the situation said that Trian is vying for many board seats at Disney. Ike Perlmutter, a former Marvel executive who has given Trian ownership of his firm interest, is one of Peltz’s allies.
Over the course of the previous 10 years, Disney’s share price has underperformed both the market as a whole and its proxy rivals, outperforming each incumbent director’s term in office. Important strategic dilemmas are looming, investor confidence is poor, and even Disney’s CEO is admitting that the company’s problems are more than previously thought, according to Trian.
Disney responded with a statement highlighting its cost-cutting initiatives from the previous year.
“Over the past twelve months, we restructured the company to restore creativity to the centre of all our businesses as we significantly reduce costs and drive efficiencies, and we are on track to achieve about $7.5 billion in cost savings – $2 billion more than our original target,” the business stated.
Disney also disclosed that Perlmutter has 78% of the shares—more than 25 million out of 33 million shares—that Peltz claims to have beneficial ownership of.
“This dynamic is relevant to assessing Mr Peltz and any other nominees he may put forth as directors, as Mr Perlmutter was terminated from his employment by Disney earlier this year and has voiced his longstanding personal agenda against Disney’s CEO, Robert A. Iger, which may be different than that of all other shareholders,” Disney stated.
Trian made his remarks the day after Disney said in an SEC filing that Jeremy Darroch, the former CEO of British television giant Sky, and James Gorman, chairman and CEO of Morgan Stanley, will join the board early in 2019.
Although Sir Jeremy Darroch and James Gorman are an improvement over the current situation, adding these directors won’t, in our opinion, boost investor confidence or deal with the underlying issues that have led to this Board’s massive value destruction and mistakes, according to Trian.
In Thursday afternoon trade, Disney shares remained unchanged. The stock has down about 20% since the conclusion of Peltz’s latest proxy war in February, and it is down around 6% since the year began.
In an action that might raise oil prices, the OPEC+ group decided on Thursday to impose extra output limitations of one million barrels per day. Alongside the tighter cuts, Saudi Arabia has extended its unilateral one million barrels per day decrease.
Several media sources reported the change, citing attendees at the group’s meeting. At their meeting on Thursday, members of OPEC+—a club that comprises some of the biggest producers in the world and their allies—will cast their votes on the agreement.
Angie Gildea, US energy head at KPMG, stated shortly after the announcement that “production increases in the US, Guyana, and Brazil will soften the blow caused by OPEC’s announced production cuts but that doesn’t mean consumers in the US won’t feel some sting from this at the pump.”
The number of homes under contract fell 1.5% from the previous month, as reported on Thursday by the National Association of Realtors. The index reading of 71.4 is the lowest since it was created in 2001. A 100 index level corresponds to the 2001 contract activity rate.
Nevertheless, the figures came after a greater drop in new house sales that same month and were better than the 2.0% decrease that Bloomberg experts had predicted.
The index, which is a leading indicator of the health of the housing market, fell, but it still shows how rising rates in October unsettled consumers on a tight budget and caused pending sales in the resale market to decline by 8.5% year.
Following a significant reading on consumer inflation, investors continued to bet on interest rate reduction, and US equities rose on Thursday morning, putting them on course for their best month of the year.
The tech-heavy Nasdaq Composite (^IXIC) and the S&P 500 (^GSPC) edged up roughly 0.2% and 0.6%, respectively, while the Dow Jones Industrial Average (^DJI) led advances by over 200 points.