Market Update – November 25th, 2024

Financial Markets

It was a quieter week ahead of the Thanksgiving holiday, with stocks finishing the week on a positive note. As of close Friday, November 22nd, the Dow Jones Industrial Average led the gains, rising 2%, followed by the Nasdaq Composite at 1.75%, and the S&P 500 at 1.72%. Bonds were relatively flat, with the Barclays Aggregate Bond Index edging up 0.16%.

Source: Zacks

Market News

Leading Economic Indicators

The Conference Board’s Leading Economic Index (LEI) for the U.S. declined by -0.4% in October 2024, reaching 99.5, following a -0.3% drop in September, revised up from a -0.5% decline. Over the six-month period from April to October 2024, the LEI fell by -2.2%, slightly more than the -2.0% decline seen in the previous six months.

The largest negative contributor to this decline was weak manufacturer new orders, which were sluggish in 11 out of 14 industries. Other negative factors included average weekly manufacturing hours and the inverted yield curve. On the contrary, the S&P 500 and Leading Credit Index were positive contributors to the LEI. As a whole, the LEI remains one of the most bearish economic indicators, signaling a recession or economic downturn for the past two years.

Existing Home Sales

Existing-home sales volumes increased by 2.9% annually in October, marking the first year-over-year gain since July 2021. Sales rose in the Midwest, South, and West, while remaining unchanged in the Northeast. Inventory continued to rise, reaching 4.2 months’ worth. The median sales price saw moderate growth, up 4% from a year ago to $407,200.

According to NAR Chief Economist Lawrence Yun, “The worst of the downturn in home sales could be over, with increasing inventory leading to more transactions. Additional job gains and continued economic growth appear assured, resulting in growing housing demand.” This potential improvement in the housing market is also supported by Federal Reserve rate cuts, though mortgage rates have risen since the Fed’s first rate cut in September.

Source: National Association of Realtors

Nvidia Earnings

Shares of Nvidia saw added volatility last week following the release of their quarterly earnings report. The chipmaker exceeded both top and bottom-line expectations, but markets expressed slight concern over the slowdown in sales growth, which, though still impressive at 94% annually in the quarter, is slowing down compared to previous performance. Nvidia’s earnings are crucial not only because they are one of the largest publicly traded U.S. companies, but also because they serve as a key barometer for the overall health of the technology sector.

Source: Zacks

Target Earnings

Target missed both revenue and earnings expectations for the third quarter, in stark contrast to its largest competitor, Walmart, which beat estimates and offered positive forward guidance. Target’s earnings per share fell 20% below Wall Street’s estimate, marking its biggest miss in two years and its first revenue shortfall since August 2023.

The company also lowered its full-year guidance, with CEO Brian Cornell attributing the underperformance to “lingering softness in discretionary categories”. Meanwhile, Walmart reported growth in discretionary sales and greater success with its Walmart+ subscription service, compared to the underwhelming performance of Target’s Circle 360 program. Following the disappointing news, Target’s stock plunged more than -20% last Wednesday morning.

Source: Morningstar

Initial Claims

Initial claims for the week ending November 16th came in at 213,000, slightly down from the previous week, reflecting a normalization in the labor market. This comes after a sharp decline in nonfarm payroll gains in October, which reached the lowest level since 2020, with only 12,000 jobs added in the month. The true test of labor market conditions will come with the November employment report, due in the first week of December.

Source: Department of Labor

Summary

It was a relatively quiet week ahead of Thanksgiving, with U.S. stocks ending on a positive note despite mixed economic signals. The Conference Board’s Leading Economic Index continued its decline, pointing to potential recessionary risks, while existing-home sales saw their first annual increase since 2021, hinting at a possible market recovery. Nvidia delivered strong earnings but faced scrutiny over slowing growth, while Target missed estimates and lowered guidance, contrasting with Walmart’s positive performance. Labor market conditions remained steady, with initial claims showing slight improvement as investors await the next monthly jobs report.

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