A tech rally pushed the major indexes to new highs last week as the latest economic data releases did little to shake investor confidence that the Federal Reserve will cut interest rates at its final meeting of 2024.
In the week ahead, a crucial reading of inflation, the Consumer Price Index (CPI), is slated for release on Wednesday. A reading on wholesale inflation, the Producer Price Index (PPI), will follow on Thursday.
“The Fed should be in a position to move forward on the December rate cut, but next week’s CPI report now becomes another significant milestone in the policy-adjustment calculus,” BlackRock chief investment officer of global fixed income Rick Rieder wrote on Friday,
“The CPI and PPI price data next week will be the main determinant of the Fed’s interest rate decision this month,” said Capital Economics deputy chief North America economist Stephen Brown.
As of Friday, markets were pricing in a roughly 85% chance the Fed cuts interest rates by a quarter of a percentage point on Dec. 18, per the CME FedWatch Tool.
The final CPI release before the Fed’s meeting is expected to be released at 8:30 a.m. ET on Wednesday. Wall Street economists expect headline inflation rose 2.7% annually in November, an increase from the 2.6% in October. Prices are set to rise 0.3% on a month-over-month basis, per economist projections, above the 0.2% month-over-month increase in September.
On a “core” basis, which strips out food and energy prices, CPI is expected to have risen 3.3% over last year in November. This would mark the fourth straight month of a 3.3% reading of core CPI. Monthly core price increases are expected to clock in at 0.3%, also in line with the October gain.
“The disinflationary momentum is fading, and new headwinds (e.g., the potential for tariffs and tax cuts) have emerged that make the final leg of inflation’s journey back to the Fed’s 2% target look increasingly difficult,” the Wells Fargo Economics team led by Jay Bryson wrote in a weekly note. “The stubborn picture of inflation that has surfaced over the past few months is unlikely to be altered by the November CPI report.”
Markets drifted higher in the prior week in a similar fashion to that seen since President-elect Donald Trump won the nomination on Nov. 6.
Citi US equity strategist Scott Chronert, who sees the S&P 500 ending the year at 6,100, remarked the market action has been “more of the same” and “post election enthusiasm to a markets-friendly Trump administration remains at work.”
This has been hallmarked by significantly low volatility in the market. The CBOE Volatility Index, known as simply the VIX (^VIX), has been hovering around 13, its lowest level since before the market drawdown seen in early August.
As of now, Chronert sees one clear risk event on Dec. 18 that can stop the rally into year-end.
“The December Fed meeting seems to be the remaining hurdle to price action into year-end,” Chronert said.
And the concern of a hawkish Jerome Powell at the Fed’s final meeting of 2024 could start brewing in the week ahead if the November inflation data is worse than expected.
“The inflation numbers definitely are something,” Calamos Investments CEO John Koudounis told Yahoo Finance when asked what risks he’s concerned about into year-end. “If they’re really out of whack, that’s going to be something that people are going to look at.”
The Magnificent Seven tech stocks roared in the past week. All seven stocks — Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla (TSLA), and Nvidia (NVDA) — all handily outperformed the S&P 500. Meta, Amazon, and Apple all closed at record highs on Friday. Roundhill’s Magnificent Seven ETF (MAGS), which tracks all seven stocks, also closed at an all-time high.
The move higher in Big Tech comes as many Wall Street strategists have been calling for a broadening out of stock market performance in 2025. But as we noted last week, the near-term fundamental story has been favoring the Magnificent Seven, where earnings estimates have largely been holding up better than the rest of the market.
This trend has some investors still bullish on the larger tech cohort headed into next year.
“If you overlay relative price trends of technology with relative earnings trends, they’ve been going hand in hand,” Trust co-chief investment officer Keith Lerner told Yahoo Finance.
Lerner added that on a three-year rolling basis, the Technology sector itself is outperforming the S&P 500 by 33%, a far cry from the 252% outperformance seen at the peak of the dot-com bubble. This means tech stocks, and the bull market overall, could have more room to run.
“Every bull market tends to have a theme,” Lerner said. “And if you believe the bull market is intact, which we do, then that theme is likely to continue to the end of it. And when it tops, that likely tells you we’re at the top of the bull market.”
Economic data: Wholesale inventories, month-over-month, October final (0.2% prior); New York Fed one-year inflation expectations, November (2.87% prior)
Earnings: Casey’s (CASY), C3.ai (AI), MongoDB (MDB), Rent the Runway (RENT), Oracle (ORCL), Toll Brothers (TOL), Vail Resorts (MTN)
Economic data: NFIB Small Business Optimism, November (94.1 expected, 93.7 prior); Nonfarm Productivity, third quarter final (2.2% expected, 2.2% prior); Unit labor costs, third quarter final, (1.4% expected, 1.9% prior)
Earnings: AutoZone (AZO), Academy Sports and Outdoors (ASO), Dave & Buster’s (PLAY), GameStop (GME), Stitch Fix (SFIX),
Wednesday
Economic data: MBA Mortgage Applications, week ending Dec. 6 (+2.8% prior); Consumer Price Index, month-over-month, November (+0.3% expected, +0.2% prior); Core CPI, month-over-month, November (+0.3% expected, +0.3% previously); CPI, year-over-year, November (+2.7% expected, +2.6% previously); Core CPI, year-over-year, November (+3.3% expected, +3.3% previously); Real average hourly earnings, year-over-year, November (+1.4% previously)
Earnings: Adobe (ADBE), Macy’s (M), Vera Bradley (VRA)
Economic data: Initial jobless claims, week ending Dec. 7 (224,000 prior); Producer Price Index, month-over-month, November (+0.3% expected, 0.2% previously); PPI, year-over-year, November (+2.4% prior)
Earnings: Broadcom (AVGO), Costco (COST), Lovesac (LOVE)
Economic data: Import prices, month-over-month, November (-0.3% expected, +0.3% prior); Export prices, month-over-month, November (-0.3% expected, +0.8% prior)
Earnings: No notable earnings.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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