The Thanksgiving holiday resulted in relatively subdued markets in the United States. However, there were a few significant developments. On Tuesday, the minutes from the November FOMC meeting were released and provided some insight into what Fed officials are thinking.
According to those minutes, it’s unlikely that the Fed will move to cut rates anytime soon. Although inflation has dropped to 3.2 percent on an annual basis from 9 percent last year, it is still well above the central bank’s goal of 2 percent. There is some worry that strong GDP growth could result in inflation that is stubborn or accelerates. It’s unclear whether the Fed would actually raise rates further as it has been suggested that peak interest rates are already in place.
The Fed will meet again in December with most analysts believing that the Fed Funds Rate will remain in a range between 5.25 percent and 5.5 percent. In addition to the Fed minutes, a slew of data was released on Wednesday. For instance, there were 209,000 claims for unemployment benefits this week compared to a forecast of 226,000.
The revised University of Michigan Consumer Sentiment report showed that sentiment was at 61.3 percent compared to a forecast of 61.1 percent. Inflation expectation for the year increased slightly to 4.5 percent compared to 4.4 percent last month.
Finally, on Friday, S&P Global released its Flash Manufacturing and Flash Services PMI. The manufacturing index came in at 49.4 while the services index came in at 50.8. These figures suggest that manufacturing is experiencing a minor contraction while the service sector is continuing to expand, which is in line with what has been happening in recent months. It is widely known that inflation and GDP figures have been buoyed by increased spending on services during the summer and fall of 2023.
The Dow spent most of the week in a stair step pattern as it would make new highs, consolidate and then continue moving to the upside. On Monday, the market opened at 34,936, which was also the low point of the abbreviated week. It would make a high of 35,389 on Friday morning before easing back to close the session. The Dow would finish the week up about 1 percent and is up 3.3 percent for the year.
The Nasdaq would spend most of the week in a narrow trading range. On Tuesday, the market made its low of the week at 14,154 and made a high of the week on Wednesday when it reached 14,355. Over the course of the last five trading days, the Nasdaq gained 140 points or 1 percent. For the year, the market is up 26.19 percent.
Finally, the S&P 500 would gain roughly 1 percent to finish the week at 4,555. On Monday, the market opened at 4,520 and would not give anything back for the rest of the week. It would make its weekly high of 4,561 on Wednesday afternoon. For the year, the S&P is up 528 points or 13.11 percent.
The upcoming week is poised to have significantly more volatility as traders are eager to get back to work after the holiday. On Tuesday, the Consumer Board (CB) Consumer Confidence report is issued while Wednesday sees the release of the initial GDP numbers for the previous quarter. Analysts expect that the economy expanded by 5 percent in the previous three months. Unemployment claim data will be released on Thursday while manufacturing price data will be released on Friday. Federal Reserve Chairman Powell will also speak on Friday afternoon, which always has the potential to move markets.
Traders may also want to keep an eye out for inflation and GDP announcements coming from Canada, Australia and Europe. It’s not uncommon for an uptick in inflation or economic growth elsewhere in the world to have an impact on what the Fed might do. Therefore, understanding what is happening internationally may provide traders with insight as to how to best manage their own portfolios.