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S&P flash U.S. services index rises to 51.3 in December from 50.8
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Jeffry Bartash
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Tag: securities
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Chaotic 'triple witching' set for Friday, as $5.3 trillion in options expire
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Options contracts tied to more than $5 trillion worth of stocks, exchange-traded funds and indexes are set to expire on Friday as the latest “triple witching” expiration event collides with the rebalancing of the S&P 500 and Nasdaq-100.
The result could be a high-octane, and potentially extremely volatile, session where tens of billions of contracts and shares could change hands, market strategists said.
According to figures from Rocky Fishman, founder of Asym500, options with a notional value of $5.3 trillion are set to expire, with the biggest slug expiring ahead of the open.
ASYM50
On one side, many traders will be cashing in bullish bets that are deep in the money, while some roll their positions, forcing market-makers to continue to hedge their exposure.
At the same time, managers of index-tracking funds will need to finish adjusting their holdings before the announced index changes take effect.
Already, trading volume has been trending higher all week. In the U.S. market, 17 billion shares changed hands on Thursday, according to Steve Sosnick, chief market strategist at Interactive Brokers, during a phone interview with MarketWatch. That is up from 10.6 billion on Tuesday.
“I expect to see enormous volumes tomorrow in a lot of popular names,” Sosnick said.
“Not only will this one be the largest option expiration of the year (as is typical for December), but it is currently set up to become the largest SPX option expiration in more than a decade,” Fishman said in a report shared with MarketWatch.
Brent Kochuba, founder of Spotgamma, an options-market analytics provider, went even further during a phone interview with MarketWatch: “This might be the biggest options expiration ever.”
ASYM50
As markets have rallied, traders have been scooping up bullish options contracts at a record pace, according to data from Cboe Global Markets, the biggest operator of options exchanges in the U.S.
For S&P 500-linked options, typically the most popular product, 4.8 million contracts changed hands on Thursday, according to Cboe, a new record, surpassing the previous record from Nov. 14.
Also, total call-trading volume for all U.S. equity options exceeded 30 million contracts on Wednesday, according to Goldman Sachs Group, making it one of the busiest days for trading in bullish contracts this year.
Aggressive call-buying over the past month has helped push the S&P 500 to just shy of its record closing high, options-market experts said. The S&P 500
SPX
gained 8.9% in November, its best month of 2023, and the 18th best-performing month of the past 73 years. And it has continued to climb in December, having risen 3.3% through Thursday’s close, according to FactSet data.Earlier this week, options strategists warned that markets might run into trouble at 4,600 on the S&P 500. They warned that a “call wall” of open-interest in bullish contracts around that level could force market makers to put the breaks on the rally.
Instead, bullish traders blew through the call wall, pushing it higher to 4,700, said Kochuba.
The S&P 500 closed at 4,719.55 on Thursday, its highest close since Jan. 12, 2022, according to FactSet data. The index is now sitting within 1.75 percentage points of its record closing high of 4,796.56 on Jan. 3, 2022.
Traders’ bullishness recently helped push the Cboe Volatility Index
VIX,
otherwise known as Wall Street’s “fear gauge,” to multiyear lows, according to FactSet data.To be sure, it isn’t just S&P 500 options and contracts tied to popular stocks like Tesla Inc.
TSLA,
+4.91%
seeing explosive volume: Calls tied to the iShares Russell 2000 ETF
IWM,
which tracks the small-cap Russell 2000, hit 1.35 million contracts, the third-highest ever, according to Goldman. Activity in options contracts linked to small-cap stock indexes has surged since late October.Heavy call buying has pushed the put-call skew for S&P 500 options to its lowest level in a year, according to data from Goldman Sachs Group.
This shows that investors have been scrambling to buy bullish contracts, while largely shunning bearish ones, as stocks marched higher. Goldman analysts described Friday as “the last major liquidity event of the year” in a note to clients obtained by MarketWatch.
GOLDMAN SACHS
“Triple Witching” days happen once a quarter. They are thusly named because options tied to single stocks, ETFs and indexes will expire, alongside index-tracking futures contracts. Options-market experts say they are typically associated with more intraday swings and higher trading volume.
Making things even more interesting is the fact that the quarterly rebalancing of the S&P 500 and Nasdaq-100 is due to take effect after markets close on Friday.
Normally routine, this quarter’s rebalancing is drawing outsize attention following an extremely rare ad hoc rebalancing over the summer to rein in the influence of megacap stocks in the Nasdaq-100.
Earlier this month, Standard & Poor’s announced its rebalancing plans, which included reducing the weighting of two Magnificent Seven stocks, Apple Inc.
AAPL,
+0.08%
and Alphabet Inc.
GOOG,
-0.57% GOOGL,
-0.48% .
At the same time, Amazon.com Inc.
AMZN,
-0.95% ,
which is also part of the Mag 7, will see its weighting increased. Meanwhile, three companies will join the index, including Uber Inc.
UBER,
+0.86% ,
while shares of three other companies depart.Kochuba believes Friday’s expiration could remove the last barrier holding stocks back from rocketing to record highs before the end of the year.
“After OpEx, markets will be able to move more freely,” Kochuba said.
Garrett DeSimone of OptionMetrics cautioned that investors shouldn’t place too much weight on options-market activity and other technical factors.
“At the end of the day, macro trumps everything,” he said during an interview with MarketWatch.
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Powell surprises with dovish turn; economists mull how many Fed rate cuts in '24
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Federal Reserve Chairman Jerome Powell startled economists with a press conference Wednesday that was viewed as much more dovish than expected.
It was “12 doves a-leaping,” said Michael Feroli, U.S. economist at JPMorgan Chase.
“The Fed can’t believe its luck. The data is going their way,” said Krishna Guha, vice chairman of Evercore ISI.
The first dovish signals came in the Fed’s statement and economic forecasts at 2 p.m. Eastern. First, the Fed penciled in three rate cuts in 2024 instead of two that were projected in September. The Fed also softened its tightening bias by saying they were mulling the need for “any” more hikes.
Then, half an hour later at his press conference, “Chair Powell did nothing to undo the impression of those signals,” said Feroli, in a note to clients. Powell said Fed officials were starting to discuss when to cut rates.
“The question of when it will be appropriate to begin dialing back the policy restraint” was clearly “a discussion for us at out meeting today,” Powell said. Fed officials think the Fed is “likely at or near the peak rate for this cycle.”
While Powell didn’t take rate cuts “off the table,” they are “collecting dust,” said Michael Gregory, deputy chief economist at BMO Capital Markets.
Markets reacted with the 10-year Treasury yield
BX:TMUBMUSD10Y
falling to 4.025%.Traders in derivative markets now see an 80% chance of the first rate cut in March, and now see five quarter-point cuts next year.
Matt Luzzetti, chief U.S. economist at Deutsche Bank, said the main thing learned from Wednesday’s press conference was that Fed Gov. Chris Waller’s dovish comments a few weeks ago were a reflection of the mainstream view at the central bank, rather than a dovish outsider.
In a speech late last month, Waller raised the possibility of a rate cut by spring if inflation keeps slowing.
Some economists think that March is too soon for a rate cut.
“We still judge rate cuts will commence later rather than sooner, still by the end of the third quarter of 2024,” Gregory of BMO Capital Markets said.
Feroli said he now sees the first rate cut in June, instead of his prior forecast of July, and predicted that the Fed will cut five times by the end of 2024.
Luzzetti of Deutsche Bank sees six rate cuts next year, but not beginning until June as the economy falls into a mild recession.
The Fed doesn’t forecast a recession. Its rate cuts are purely a story of weakening inflation. If there is a recession, the Fed will cut very fast, Luzzetti said.
Diane Swonk, chief economist at KPMG, said the odds of a recession are lower now that the Fed has signaled it will actively take steps to try to avoid one.
The Fed wants the economy to cruise at a lower altitude, and no longer wants a landing, Swonk said in an interview.
That is a 180-degree turn from Powell’s speech in Jackson Hole, Wyo., in the summer of 2022 when he spoke for less than 10 minutes but warned of “pain” and the unfortunate costs of fighting inflation. That speech, “a bucket of ice water,” Swonk said, sent the stock market reeling at the time.
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S&P 500's year-end rally lifts 51 stocks to a record close
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It has been a record day for 10% of the S&P 500.
A group of 51 stocks in the benchmark equity index swept to record finishes on Tuesday, the most since April 20, 2022, according to a tally from Dow Jones Market Data.
It was a record day for 51 stocks in the S&P 500.
Dow Jones Market Data
Stocks that logged a record close on Tuesday included Allstate Corp
ALL,
+0.90% ,
Costco Wholesale
COST,
+0.90% ,
D.R. Horton, Inc.
DHI,
+0.65% ,
Mastercard
MA,
+1.21% ,
T-Mobile US Inc.,
TMUS,
+1.00%
Visa Inc.
V,
+1.19%
and Waste Management Inc.,
WM,
+1.85%
among others.Equities have been in a year-end rally mode, driven higher by tumbling benchmark yields that finance much of the U.S. economy and expectations of coming interest-rate cuts.
The 10-year Treasury rate
BX:TMUBMUSD10Y
fell to 4.2% on Tuesday from a high of about 5% in October.The Dow Jones Industrial Average
DJIA
on Tuesday ended at its third-highest level on record, while the S&P 500 index
SPX
and Nasdaq Composite Index
COMP
added to a string of new closing highs for 2023. The Dow finished 0.6% away from its record close logged almost two years ago, while the S&P 500 was only 3.2% below its close from the same period, according to Dow Jones Market Data.The push higher for stocks followed inflation data for November that showed price pressures continued to ease from peak levels, but still were above the Fed’s 2% annual target.
The consumer-price index pegged the annual rate of inflation at 3.1%, down from 3.2% in October, with the “last mile” of inflation expected to be the hardest part to tame.
Investors now will be focused on Wednesday’s Federal Reserve decision. Short-term interest rates are expected to remain unchanged at a 22-year high, but the central bank is expected to update its “dot plot” forecast of rates over a longer time horizon.
“Although the market will focus on the timing of rate cuts, we suspect Chair Powell will be keen to strike notes of caution to avoid financial conditions easing too much further to ensure the Fed continues to see encouraging progress on inflation,” said Emin Hajiyev, senior economist at Insight Investment, in emailed comments.
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U.S. stocks open mixed as investors weigh fresh data on inflation
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U.S. stocks opened mixed on Tuesday as investors weighed a reading on inflation that was largely in line with economists’ forecasts. The Dow Jones Industrial Average
DJIA,
+0.35%
was up less than 0.1% soon after the opening bell, while the S&P 500
SPX,
+0.07%
slipped 0.2% and the Nasdaq Composite
COMP,
+0.07%
fell 0.1%, according to FactSet data, at last check. The Bureau of Labor Statistics said Tuesday that inflation, as measured by the consumer-price index, rose 0.1% in November for a year-over-year rate of 3.1%. Economists polled by the Wall Street Journal had forecast that inflation would be unchanged in November while rising at an annual pace of 3.1%. So-called core inflation, which excludes energy and food prices, climbed 0.3% last month to increase 4% in the 12 months through November. That was in line with economists’ expectations. In the bond market, the yield on the 10-year Treasury note
TMUBMUSD10Y,
4.234%
was up one basis point at around 4.24%, according to FactSet data, at last check.[ad_2]
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U.S. stocks open mostly lower as investors look ahead to inflation data, Fed policy meeting
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U.S. stocks opened mostly lower on Monday, after six straight weeks of gains, as investors look ahead to inflation data and the Federal Reserve’s policy meeting this week. The Dow Jones Industrial Average
DJIA,
+0.17%
was up 0.2% soon after the opening bell, while the S&P 500
SPX,
+0.03%
shed 0.1% and the Nasdaq Composite
COMP,
-0.27%
fell 0.4%, according to FactSet data, at last check. A reading on November inflation, as measured by the consumer-price index, will be released on Tuesday. The following day, the Fed will release a statement on its monetary policy, after concluding its two-day meeting. Last week, all three major U.S. stock benchmarks closed at their highest levels of the year, with the S&P 500 finishing Friday at its highest value since March 29, 2022.[ad_2]
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This week's Fed meeting could slam brakes on year-end stock rally
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The rally lifting U.S. stocks to fresh 2023 highs in the year’s home stretch could be at risk if the Federal Reserve on Wednesday crushes expectations for interest-rate cuts in 2024.
U.S. central bankers and investors haven’t exactly been seeing eye-to-eye about when the Fed will start easing its monetary policy, according to Melissa Brown, senior principal of applied research at Axioma.
Traders also have been flip-flopping on their forecasts for rate cuts over the past few months, based on fed-funds futures data.
Oxford Economics/Bloomberg
Given the whipsaw of recent volatility, it isn’t hard to imagine a jittery market backdrop as investors wait to hear from Fed Chairman Jerome Powell on Wednesday, even though the central bank isn’t expected to change its range for short-term interest rates. Since July, the Fed funds rate rate has been at a 22-year high in a 5.25% to 5.5% range.
U.S. stocks advanced this year after a bruising 2022, adding big gains in November, as benchmark 10-year Treasury yields
BX:TMUBMUSD10Y
tumbled from a 16-year high of 5%. The Dow Jones Industrial Average
DJIA
closed on Friday only 1.5% away from its record close nearly two years ago. The S&P 500 index
SPX
booked its highest finish since March 2022, according to Dow Jones Market Data.Year Ahead: The VIX says stocks are ‘reliably in a bull market’ heading into 2024. Here’s how to read it.
“I don’t see any report on the horizon that would really make them [the Fed] change their stance on where we are on monetary policy,” said Alex McGrath, chief investment officer at NorthEnd Private Wealth. It is mostly the expectation of Fed rate cuts next year that have supported stock and bond markets rallies recently, he said.
The Dow Jones closed 9.4% higher on the year through Friday, the S&P 500 was up 19.9% and the Nasdaq Composite advanced 37.6% for the same period, according to FactSet data.
“We have been a little skeptical of the market’s excitement over rate cuts early next year,” said Ed Clissold, chief U.S. strategist at Ned Davis Research.
It takes a gradual process for the Fed to move away from its monetary policy tightening, Clissold told MarketWatch. The Fed is likely to pivot its tone from being very hawkish to neutral, remove the tightening bias, and then talk about rate cuts, noted Clissold.
The bond market on Friday already was again flashing signs of a potential rethink by investors about the path of interest rates in 2024.
Junk bonds
JNKHYG,
often a canary in the coal mine for markets, hit pause on a rally that started in late October as benchmark borrowing costs fell, even though the sector has benefited from big inflows of funds in recent weeks.Treasury yields for 10-year and 30-year
BX:TMUBMUSD30Y
bonds also shot higher Friday, echoing volatility that took hold in mid-October.Read: Investors have fought a 2-year battle with the bond market. Here’s what’s next.
Mike Sanders, head of fixed income at Madison Investments, has been similarly cautious. “I think the market is a little too aggressive in terms of thinking that cuts are going to occur in March,” Sanders said. It is more likely that the Fed will start cutting rates in the second half of next year, he said.
“I think the biggest thing is that the continued strength in the labor market continues to make the services inflation stickier,” Sanders said. “Right now we just don’t see the weakness that we need to get that down.”
Friday’s U.S. employment report adds to his concerns. About 199,000 new jobs were created in November, the government said Friday. Economists polled by the Wall Street Journal had forecast 190,000 jobs. The report also showed rising wages and a retreating unemployment rate to a four-month low of 3.7% from 3.9%.
The U.S. central bank will likely “try their best to push back on the narrative of cuts coming very soon,” Sanders said. That could be accomplished in its updated “dot plot” interest rate forecast, also due Wednesday, which will provide the Fed’s latest thinking on the likely path of monetary policy. The Fed’s update in September surprised some in the market as it bolstered the central bank’s stance of higher rates for longer.
There’s still a chance that inflation will reaccelerate, Sanders said. “The Fed is worried about the inflation side more than anything else. For them to take the foot off the brake sooner, it just doesn’t do them any good.”
Ahead of the Fed decision, an inflation update is due Tuesday in the November consumer-price index, while the producer-price index is due Wednesday.
Still, seasonality factors could aid the stock market in December. The Dow Jones Industrial Average in December rises about 70% of the time, regardless of whether it is in a bull or bear market, according to historical data.
See: Stock market barrels into year-end with momentum. What that means for December and beyond.
“The overall market outlook remains constructive,” said Ned Davis’s Clissold. “A soft landing scenario could support the bull market continuing.”
Last week the Dow eked out a gain of less than 0.1%, the S&P 500 edged up 0.2% and the Nasdaq rose 0.7%. All three major indexes went up for a sixth straight week, with the Dow logging its longest weekly winning streak since February 2019, according to Dow Jones Market Data.
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S&P 500 ends at 2023 high, books longest weekly win streak in 4 years
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U.S. stocks closed higher on Friday, shaking off earlier weakness after a strong monthly jobs report, to clinch a sixth straight week in a row of gains. The Dow Jones Industrial Average
DJIA,
+0.36%
advanced about 130 points, or 0.4%, to end near 36,247, according to preliminary FactSet data. The S&P 500 index gained 0.4% Friday and the Nasdaq Composite finished 0.5% higher. A string of weekly gains propelled the S&P 500 index
SPX,
+0.41%
to a fresh 2023 closing high and left the Dow about 1.4% away from its record close set nearly two years ago, according to Dow Jones Market Data. Equities have benefitted from a risk-on tone going into year end, which has been driven by falling 10-year Treasury yields
TMUBMUSD10Y,
4.230%
and optimism around the Federal Reserve potentially cutting interest rates in the year ahead. That hinges on if inflation continues to ease. November’s robust jobs report served as a reminder Friday of the tough path of the “last mile” in getting inflation down to the Fed’s 2% annual target. As part of this, the 10-year Treasury yield jumped about 11.5 basis points Friday to 4.244%, but still was about 74 basis points lower than its October high. For the week, the Dow was only fractionally higher, the S&P 500 gained 0.2% and the Nasdaq climbed 0.7%.[ad_2]
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November's rally just erased two months of Fed tightening, economist says
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Financial conditions are now looser than in September, says economist
Financial conditions in the U.S. are looser than in September, says economist.
Getty Images
The feel-good tone gripping markets in the home stretch of 2023 may not be what the Federal Reserve had penciled in for the holidays.
The stock market in December, once again, has been knocking on the door of record levels, driven by optimism about easing inflation and potential Fed rate cuts next year.
But while the prospect of double-digit equity gains this year would be a reprieve for investors after a brutal 2022, the latest rally also points to looser financial conditions.
Ultimately, the risk of looser financial conditions is that they could backfire, particularly if they rub against the Fed’s own goal of keeping credit restrictive until inflation has been decisively tamed.
Read: Inflation is falling but interest rates will be higher for longer. Way longer.
Specifically, the November rally for the S&P 500 index
SPX
can be traced to the 10-year Treasury yield
BX:TMUBMUSD10Y
dropping to 4.1% on Thursday from a 16-year peak of 5% in October.Falling 10-year Treasury yields from a 5% peak in October coincides with a sharp rally in the S&P 500 at the tail end of 2023.
Oxford Economics
The Fed only exerts direct control over short-term rates, but 10-year and 30-year Treasury yields
BX:TMUBMUSD30Y
are important because they are a peg for pricing auto loans, corporate debt and mortgages.That makes long-term rates matter a lot to investors in stocks, bonds and other assets, since higher rates can lead to rising defaults, but also can crimp corporate earnings, growth and the U.S. economy.
Michael Pearce, lead U.S. economist at Oxford Economics, thinks the November rally may put Fed officials in a difficult spot ahead of next week’s Dec. 12 to 13 Federal Open Market Committee meeting — the eighth and final policy gathering of 2023.
“The decline in yields and surge in equity prices more than fully unwinds the tightening in conditions seen since the September FOMC meeting,” Pearce said in a Thursday client note.
The Fed next week isn’t expected to raise rates, but instead opt to keep its benchmark rate steady at a 22-year high in a 5.25% to 5.5% range, which was set in July. The hope is that higher rates will keep bringing inflation down to the central bank’s 2% annual target.
Ahead of the Fed’s July meeting, stocks were extending a spring rally into summer, largely driven by shares of six meg-cap technology companies and AI optimism.
Rates in September were kept unchanged, but central bankers also drove home a “higher for longer” message at that meeting, by penciling in only two rate cuts in 2024, instead of four earlier. That spooked markets and triggered a string of monthly losses in stocks.
Pearce said he expects the Fed next week to “push back against the idea that rate cuts could come onto the agenda anytime soon,” but also to “err on the side of leaving rates high for too long.”
That might mean the first rate cut comes in September, he said, later than market odds of a 52.8% chance of the first cut in March, as reflected by Thursday by the CME FedWatch Tool.
Stocks were higher Thursday, poised to snap a three-session drop. A day earlier, the S&P 500 closed 5.2% off its record high set nearly two years ago, the Dow Jones Industrial Average
DJIA
was 2% away from its record close and the Nasdaq Composite Index
COMP
was almost 12% below its November 2021 record, according to Dow Jones Market Data.Related: What investors can expect in 2024 after a 2-year battle with the bond market
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U.S. stocks finish lower as S&P 500, Dow industrials suffer three straight sessions of declines
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U.S. stock indexes ended lower on Wednesday, with the S&P 500
SPX,
-0.39%
and the Dow Jones Industrial Average
DJIA,
-0.19%
booking a third straight session of losses as investors awaited more labor-market data for clarity about the state of the economy. The Dow industrials fell 70 points, or 0.2%, to end at 36,054, while the S&P 500 finished 0.4% lower and the Nasdaq Composite
COMP,
-0.58%
retreated 0.6%. U.S. businesses added 103,000 new jobs in November, paycheck company ADP said on Wednesday, in another sign of slower hiring and a softer labor market. Investors will monitor jobless claims numbers on Thursday morning before contemplating the widely followed official data on nonfarm payrolls, wages and the unemployment rate, due out Friday 8:30 a.m. Eastern time.[ad_2]
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Why the U.S. economy isn't out of the woods as stock market soars
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A rally in the U.S. stock and bond markets in the past week defied the bears and fueled hopes for more gains to come by year-end and in 2024 as Wall Street bought into the idea that the economy will pull off a “soft landing” after a run of interest-rate hikes by the Federal Reserve.
But market skeptics are putting investors on alert that the “soft-landing” scenario is still at risk with consumer spending and job growth slowing, along with corporate earnings.
“The equity market is misguided,” said Josh Schachter, senior portfolio manager at Easterly Investment Partners, in a phone interview with MarketWatch. “The markets are behaving in almost a bipolar fashion — some asset classes such as bonds
BX:TMUBMUSD10Y,
oil
BRN00,
-0.29% ,
and dollar
DXY,
are being priced for a recession, while other assets such as equities and bitcoin
BTCUSD,
+2.16% ,
are priced risk-on.”U.S. stocks built on their November gains in the past week, with the S&P 500 index
SPX
ending at new 2023 high on Friday and the Dow Jones Industrial Average
DJIA
logging its fifth week in the green. The rebound in stocks was due in part to bond investors starting to believe the Fed is done raising interest rates and is likely to begin cutting them by the first quarter of 2024.Meanwhile, the narrative that a resilient labor market and steadier-than-expected economic growth should keep a recession at bay has gained traction, bolstering the “goldilocks” scenario for the financial markets.
However, signs are emerging that consumer spending, which accounts for about 70% of the U.S. economic output and has boosted the economy this year, has likely run its course following the post-pandemic recovery. Credit card and car loan delinquency rates are rising, student loan payments have resumed, consumer spending is cooling, and there are warnings from top retailers.
Joseph Quinlan, head of CIO market strategy for Merrill and Bank of America Private Bank, said the “softness” in the U.S. consumer sector is visible but not huge, referring to that as “a canary in a coal mine,” he told MarketWatch via phone on Thursday.
The pullback in consumer spending is welcome news for Fed officials, who have increased interest rates 11 times since March 2022 to get inflation back to its preferred target of 2%. However, some analysts are worried that high interest rates and a decline in pandemic savings could eventually translate to weaker consumers in 2024, potentially another sign of a long-predicted slowdown in the U.S. economy.
“One of the things I’m most concerned about is consumers’ ability to continue to pace the economy — you’ve got several headwinds that haven’t really borne completely out yet,” said Jason Heller, senior executive vice president at Coastal Wealth. “Does the consumer continue to behave the way they behaved the last 36 months? I think you will eventually see a slowdown in consumer spending which is going to mandate a slowdown in the labor market.”
Lauren Goodwin, economist and portfolio strategist at New York Life Investments, acknowledged that a modest slowdown in inflation and employment growth means that a “Fed relief rally” in stocks can be sustained, but her concern is this late-cycle limbo is no different than those of the past, which is a moment of “goldilocks” before the very reason that inflation is moderating — slowing economic growth and employment — becomes clear in the data.
See: ‘We Are Still Headed for a Pretty Hard Landing,’ Ex-Treasury Secretary Larry Summers Says
That’s why the November employment report, which will be released by the Bureau of Labor Statistics next Friday at 8:30 a.m. Eastern, will be key for investors to watch. The U.S is expected to add 172,500 jobs in November after a 150,000 increase in the prior month, according to economists polled by Dow Jones. The percentage of jobless Americans seeking work is forecast to stay the same at 3.9%, leaving it at the highest level since the beginning of 2022.
See: U.S. job growth pick up on the radar this coming week
In fact, nonfarm payroll report publication days have been among the most volatile for stocks in 2023, compared with the release of monthly consumer-price index readings, which sparked some of the biggest daily up and down moves for the S&P 500 and other major indexes in 2022.
See also: Do CPI days still rock the stock market? How 2023 stacks up to 2022
This year, the S&P 500 saw an absolute average percentage change of 1.12% on employment situation release dates, compared with an average percentage move of 0.64% on CPI days, according to figures compiled by Dow Jones Market Data.
That said, analysts are skeptical if the employment data is able to tell “a radically different story” but suggest the labor market will remain relatively tight into 2024, said Quinlan and Lauren Sanfilippo at Merrill and Bank of America Private Bank, in a phone interview.
See: What 2024 S&P 500 forecasts really say about the stock market
Too much optimism in 2024 earnings growth
Corporate America and their shares are telling investors a different story about next year.
With an estimated average S&P 500 earnings growth of 11.7% next year, the U.S. stock market is nowhere near recessionary concerns, said Heller. “We’ve [the stocks] priced in pretty significant growth in 2024.”
Strategists at Merrill and Bank of America Private Bank are in the camp of expecting a “mid-single digit” earnings growth for the S&P 500 in 2024, as earnings have troughed and the economy will fall back to the 2%-level of real growth after high rates confine consumer spending and corporate profits, cooling a red-hot economy.
To be sure, Wall Street analysts tend to overestimate the earnings-per-share (EPS) for the S&P 500, said John Butters, senior earnings analyst at FactSet.
The current bottom-up EPS estimate for the S&P 500 in 2024 is $246.30. If that holds true, that would be the highest EPS number reported by the large-cap index since FactSet began tracking this metric in 1996.
However, over the past 25 years, the average difference between the EPS estimate at the beginning of the year and the actual EPS number has been 6.9%, meaning analysts on average have overestimated the earnings one year in advance, said Butters in a Friday note (see chart below).
SOURCE: FACTSET
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Dow posts highest close in nearly 2 years, equities extend rally to five straight weeks
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U.S. stocks powered higher on Friday, shrugging off tough talk from Federal Reserve Chairman Jerome Powell about it being too early to talk about rate cuts. The Dow Jones Industrial Average
DJIA,
+0.82%
gained about 294 points, or 0.8%, ending near 36,245, according to preliminary FactSet data. The S&P 500 index
SPX,
+0.59%
rose 0.6%, while the Nasdaq Composite Index
COMP,
+0.55%
gained 0.6%. All three indexes also ended the week higher for five straight weeks. The gains allowed the Dow to clinch its highest close since since January 2022, while the S&P 500 finished at its highest level since March 2022, according to Dow Jones Market Data. The powerful rally in equities since early November has been attributed to easing inflation, falling long-term Treasury yields and expectations for rate cuts next year The 10-year Treasury yield
TMUBMUSD10Y,
4.200%
fell to 4.225% on Friday, after hitting 5% in October, ending the week at its lowest yield since early September, according to DJMD.[ad_2]
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Bitcoin is up 130% this year. Could it extend the rally in December and 2024?
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Bitcoin has extended its rally on Friday, rising to the loftiest level since May 2022, pushing its yearly gain up to over 130%, on pace to be one of the best performing assets this year.
The crypto
BTCUSD,
+1.28%
rose about 2.5% over the past 24 hours to around $38,676 Friday afternoon, as excitement about the potential approval of bitcoin exchange-traded funds continues to build. Bitcoin is still 44% down from its all-time high in 2021.Risk assets in general performed well in November, as concerns eased around several pressure points, including the surge in long-term Treasury yields and inflation, analysts at Grayscale Research wrote in a Friday note.
Despite outperforming many major assets year-to-date, bitcoin underperformed long-term Treasurys and the S&P 500 in November on a volatility-adjusted basis, gaining 9% for the month.
Bloomberg; Grayscale Investments
Sam Callahan, market analyst at Swan Bitcoin, said he expects bitcoin to trade between $36,000 and $40,000 by the end of the year, “provided that the macroeconomic environment doesn’t take a turn for the worse, and barring any significant positive development, such as the approval of a Spot Bitcoin ETF or the adoption of Bitcoin by a major corporation, sovereign-wealth fund, or nation-state.”
Despite bitcoin’s rally so far this year, December has historically been a particularly volatile month for the crypto, since it was created in 2009. It rose seven out of 13 times in December, according to Dow Jones Market Data.
In years when bitcoin gained more than 100% through November, the digital asset saw an average gain of 20% in December, rising four of the six times it occurred, according to Dow Jones Market Data.
To be sure, bitcoin has a relatively short history and was particularly volatile during its early years.
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Will George Santos still qualify for a pension and strolling around the House floor?
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Rep. George Santos was expelled from Congress in an historic vote Friday, following a House panel’s findings of substantial evidence of lawbreaking by the New York Republican.
But could Santos, 35, still enjoy some of the benefits that come with having served as his Long Island district’s congressman?
The answer is yes for some perks, but not all. Read on for details.
Question: Can an expelled member of Congress still collect a pension?
Answer: No, not if the lawmaker has served for less than five years. Santos was sworn into office just 11 months ago, after Republicans picked up enough seats in November 2022’s midterm elections to gain a small majority in the House.
U.S. lawmakers are eligible for a pension at age 62 only if they have completed at least five years of service, according to a Congressional Research Service report.
What’s more, lawmakers can lose their pension if they’re convicted of fraud-related offenses, and Santos is facing such charges. But that provision came relatively recently, with 2007’s Honest Leadership and Open Government Act, and some watchdogs say that law has loopholes that need to be closed up.
Question: Does an expelled member of Congress still get free healthcare?
Answer: It’s a myth that House lawmakers and U.S. senators get totally free healthcare, according to the office of Rep. Rep. Scott Perry of Pennsylvania.
Current members of Congress are authorized to receive free outpatient medical care and emergency dental care at military facilities in the Washington, D.C., area, but they’re billed for inpatient services and former members aren’t eligible, according to a separate CRS report.
Overall, just as tens of millions of Americans make use of employer-sponsored health insurance, members of Congress and designated congressional staff receive employer-sponsored insurance through the District of Columbia’s Obamacare exchange, known as DC Health Link, the report said, though some lawmakers have opted to pay for other health plans.
Question: Does an expelled member of Congress still get access to the House floor?
Answer: Yes. Former members of the House are entitled to admission to that chamber’s floor while it’s in session, as long as they aren’t lobbyists, according to another CRS report.
It’s among the courtesies and privileges for ex-lawmakers that come from U.S. law, chamber rules or as a matter of custom, the report said. Others include access to parking, athletic and dining facilities.
However, Santos on Friday sounded like he wouldn’t make use of his floor privileges or other such perks. “Why would I want to stay here? To hell with this place,” he told reporters after his expulsion, according to a CNN report.
Question: Can former House lawmakers lobby their old colleagues?
Answer: Yes, once they go through a one-year “cooling off” period.
Turning to lobbying is a common move. For example, at least 15 members of the 115th Congress had taken up work at lobbying firms by March 2019, just two months after the 116th Congress had been sworn in.
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Why do people keep suing celebrities like Ronaldo and Tom Brady over crypto losses?
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Ever since the collapse of crypto currencies last year, the lawsuits have been flying.
But a series of class-action suits targeting celebrity endorsers of crypto exchanges like FTX and Binance have been piling up in federal court in Miami, all filed by the same group of south Florida lawyers.
The latest suit names global soccer superstar Cristiano Ronaldo for allegedly promoting “the mass solicitation of investments in unregistered securities” sold by Binance, the crypto exchange that was hit with a $4 billion fine last week after pleading guilty to violating the bank secrecy act.
The suit was filed in federal court in the southern district of Florida this week and centered around Ronaldo’s role in a global marketing campaign launched in 2022 for a series of Binance NFTs — or non-fungible tokens, a form of blockchain-backed art works that were, for a brief time, wildly popular.
A representative for Ronaldo didn’t immediately respond to a message seeking comment.
The filing against Ronaldo on Monday came alongside similar class action suits naming Major League Baseball, Formula 1 racing, Mercedes Benz and the advertising giants Dentsu and Wasserman, who created much of FTX’s global promotion campaign.
Messages left with representatives for MLB, Formula 1, Mercedes Benz, Dentsu and Wasserman weren’t immediately returned.
Those suits are the latest in a series of similar class action suits starting last year against celebrity endorsers of failed crypto exchanges such as Voyager and FTX, in which customers lost billions of dollars in deposits.
Over the past 18 months, a group of south Florida lawyers led by Adam Moskowitz have brought the suits on behalf of investors who lost money in last year’s crypto collapse, against paid celebrity endorsers including Shaquille O’Neal, Mark Cuban, Tom Brady, Gisele Bundchen, Shohei Ohtani, Larry David, Steph Curry and Naomi Osaka.
“All of these celebrities were paid hundreds of millions of dollars taken directly from customer deposits,” Moskowitz said in a statement. “Some of the most famous and wealthiest groups in the world may now be held responsible for the dramatic $20 billion dollar crypto collapse and biggest financial scandals in U.S. history.”
Moskowitz, who has been joined in the suits by lawyers with the firms Mark Migdal & Hayden and Boies Schiller and Flexner, headed by famed litigator David Boies, is seeking at least $5 billion in damages from those who helped promote the crypto exchanges.
The cases from last year are ongoing and each of the celebrities named have been fighting the suits in court.
Moskowitz, who specializes in class-action lawsuits, says issues revolving around crypto first got his attention more than two years ago, before the entire market crashed, when he came to believe that the special tokens each exchange was minting amounted to an unregistered security.
He first filed a lawsuit against Voyager early last year, before the exchange collapsed and the Securities and Exchange Commission began filing suits against many in the industry accusing them of dealing in unregistered securities.
“Right then what we were doing started to gain traction,” he said.
A series of favorable court rulings have allowed his cases to gain steam, he said, and has allowed to him to take the lead in such actions.
In another class action suit filed earlier this year, Moskowitz and his partners sued a group of YouTube financial influencers for their role in promoting FTX, accusing them of taking cash for uncritically singing the exchange’s praises.
Moskowitz said several of those suits have been settled but that others have continued.
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Dow Jones ends about 80 points higher as U.S. bond yields keep falling
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U.S. stocks posted modest gains on Tuesday, resuming a strong rally in November that has been propelled by tumbling U.S. bond yields. The Dow Jones Industrial Average DJIA closed up about 83 points, or 0.2%, ending near 35,416, according to preliminary FactSet data. The S&P 500 index SPX was 0.1% higher, while the Nasdaq Composite Index COMP closed up 0.3%. Equity investors were emboldened after Fed Governor Christopher Waller said on Tuesday that a cooling economy could help bring inflation down to the central bank’s 2% yearly target, even though he also said it’s unclear if more interest rate hikes were warranted. The…
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No, Jeff Bezos hasn’t been unloading Amazon stock
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A number of Amazon.com Inc. executives have disclosed sales of some of their Amazon stock holdings in recent weeks, but Jeff Bezos, the company’s executive chair and a mega-shareholder, was not among them.
Despite some reports to the contrary, Bezos hasn’t disclosed any sales of Amazon shares AMZN for two years, but he has given some shares away to nonprofit organizations.
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Stock market is gaining momentum. What that means for December and beyond.
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Barring a sudden bout of post-Thanksgiving indigestion, the U.S. stock market looks poised to log a healthy November rally. And while there are certainly no guarantees, history says momentum is likely to beget momentum into year-end.
“I think the market is set up for a strong final six weeks of 2023 and I would expect the market to build on that momentum into year-end,” said Michael Arone, chief investment strategist at State Street, in a phone interview.
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