Friday's Market Update (November 22, 2024)

23 Nov 2024 by rate3

On Friday, equities closed higher with rising optimism, as measured by the PMI of purchasing managers. Investors rotated from tech stocks to cyclical sectors such as financials, industrials, and consumer discretionary. Nvidia and Alphabet declined, while Tesla and Walmart gained. The market is awaiting the announcement of Trump's pick for Treasury Secretary. The dollar hit a two-year high due to the ongoing Trump trade, while the Euro touched a one-year low as the EU economy slows down. BTC is still holding below 100K, waiting for a catalyst to break through, while ETH pushes toward 3.4K again.

Details

The S&P Global Composite PMI rose to 55.3 in November, indicating strong growth in the private sector. The service sector expanded significantly, while manufacturing continued to contract. New orders increased sharply, and firms' expectations for the coming year are optimistic. However, employment declined for the fourth consecutive month. 1Y trend: "Up" (PMI)
Consumer sentiment rose to a seven-month high in November. However, post-election sentiment was more moderate than initially expected. While inflation expectations for the year ahead remained low, long-term expectations increased. Uncertainty about the implementation of Trump's economic agenda persists. 1Y trend: "Up" (SCA)

Crypto

Prior to the recent BTC surge MicroStrategy had made a significant $4.6B investment in BTC, acquiring 51,780 coins. This brings the company's total BTC holdings to over $29B. MicroStrategy's stock price is closely tied to BTC's performance, reflecting investor interest in the company's BTC strategy. (source)

World Markets

The Eurozone's composite PMI fell to 48.1 in November 2024, signaling a contraction in private sector activity. Both manufacturing and services sectors experienced declines, driven by falling new orders and increased input costs. Businesses reduced their workforce due to lower demand. The outlook for the year ahead remains uncertain. 1Y trend: "Side" (PMI)
The French manufacturing PMI fell to a 22-month low of 43.2 in November. This indicates a sharp contraction in manufacturing activity, driven by falling orders and weak demand. Input prices rose while output prices declined, squeezing profit margins. The outlook for the French manufacturing sector remains bleak. 1Y trend: "Down"
India's manufacturing PMI fell slightly to 57.3 in November, but remained in expansionary territory. Strong new orders and output growth contributed to the positive reading. However, rising input costs led to increased output prices. 1Y trend: "Up"
Japan's annual inflation rate fell to 2.3% in October, the lowest in six months. This decline was mainly due to slower increases in energy prices. However, core inflation remained elevated at 2.3%. Monthly inflation increased by 0.4%. 1Y trend: "Side" (JP)
Mexico's GDP grew 1.6% YoY in Q4. This marks a continued recovery, but growth remains below an average levels (an average for a period 1994 - 2024 is 2.07%). 1Y trend: "Side" (MX)
Argentina's economic activity contracted 3.3% YoY in September. While some sectors like mining and quarrying showed growth, others like utilities, construction, and manufacturing continued to decline. Seasonally adjusted data indicated a slight increase in economic activity. 1Y trend: "Down" (Indec)

Currencies

The dollar index rose to a 2-year high (107.5), driven by a weaker euro and expectations of a less dovish Fed. The Eurozone's weak PMI data and rising geopolitical tensions have also supported the dollar's strength. The market is now focused on Trump's policies and their potential impact on inflation and interest rates. 1Y trend: "Up"
The euro fell to a one-year low as concerns about the Eurozone's economic outlook intensified. Weak PMI data, geopolitical tensions, and potential risks from trade disputes have weighed on the currency. The ECB's concerns about financial stability and economic shocks have also contributed to the euro's weakness. 1Y trend: "Down"

Commodities

WTI crude oil prices rose above $71.1 per barrel, driven by stronger demand expectations. The US S&P PMI showed strong growth, and China announced measures to boost foreign trade. However, weaker Eurozone PMI data and geopolitical tensions between Russia and Ukraine could limit price gains. 1Y trend: "Side"

Week 48 will be busy for investors, with several key economic indicators and central bank decisions. Data releases include FOMC meeting minutes, PCE inflation, GDP growth, consumer confidence, and housing data. Global economic data will include inflation figures from various European countries, GDP data from India and Canada, and interest rate decisions from South Korea and New Zealand.

Comment: What's Up With Market Risks?

The risk-off market sentiment seems to be driven solely by promises from the new White House administration to "fix the economy." However, at the moment, there is no evidence (except for unreasonably high employment and rising consumer sentiment) suggesting that the economy is heading towards a different direction than stagflation. While stocks and other equities often rise in an inflationary environment, there's no guarantee of other underlying factors of economic growth, such as increased productivity and corporate profits.