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The US stock market has rebounded from its months-long rut.
Stocks finished out their best month of the year on Thursday, breaking a three-month streak of declines for all the major indexes. The benchmark S&P 500 index is now within striking distance of where it peaked mid-summer, before negative seasonal trends and fears that the Federal Reserve would continue to raise interest rates blighted markets.
The S&P 500 jumped 9% and the Nasdaq Composite climbed 10.7% in November, both notching their best one-month gains since July 2022. The Dow Jones Industrial Average rose 8.8% to log its best monthly jump since October 2022.
Global markets had a strong month, too. The MSCI All-Country World index rose 9% in November, its best monthly performance since April 2020.
Treasury yields that have declined from 16-year highs are one factor behind the quick recovery in stocks. Investors are betting — after a slew of data releases pointing to slower inflation — that the Fed is done raising rates and will nail a soft landing, or bring down inflation to its 2% target without triggering a recession.
Those hopes gained even more traction Thursday on the tail of another inflation report. The Personal Consumption Expenditures Price Index, the central bank’s preferred inflation gauge, showed that inflation cooled last month to its lowest level since spring 2021.
The yield on the benchmark 10-year US Treasury note fell in November to 4.35% on Thursday, compared to last month’s close of 4.88%, the largest monthly drop since August 2011, according to Tradeweb.
So far this year, the S&P 500 is up 19%. The Dow Jones Industrial Average has climbed 8.5% and the Nasdaq Composite has soared 36%.
“The only way I see a rally continuing is if the bond market behaves itself,” said Richard Steinberg, chief market strategist at The Colony Group.
One characteristic of the stock rebound that bodes well for its longevity is its wide reach. The “Magnificent Seven,” a handful of mega-cap tech stocks, were responsible for nearly all of the market’s gains earlier this year. While those stocks have remained at the top of Wall Street’s scoreboard, the recent rally has encompassed a wider range of stocks.
Long-neglected pockets of the stock market, from beaten-down financials to small-caps to cyclical stocks, have climbed higher in recent weeks.
The share of stocks in the S&P 500 trading above their 200-day moving averages, a widely cited measure of market breadth, is at 60%, according to CappThesis data.
Year-end calendar effects are also in the market’s favor this month. Stocks tend to gain from late December through early January, a so-called Santa Claus rally, as investment bonuses kick in and Wall Street gets swept up by holiday-induced good cheer.
Still, a recession may not be completely out of the cards, and some investors warn that Wall Street might be getting ahead of itself on timing rate cuts. Traders have priced in rate cuts beginning early next year, according to the CME FedWatch Tool.
“A soft landing is not guaranteed. Our macro team sees the risks of a recession as low in the coming months, but they increase later in 2024,” wrote Ned Davis Research strategists in a note last month.
Several OPEC+ countries agreed to voluntarily cut oil production by a total of 2.2 million barrels per day in the first quarter of 2024, the oil producing group announced Thursday.
Saudi Arabia, the world’s biggest exporter of crude oil, will lead the effort by extending a voluntary production cut of 1 million barrels per day — previously intended to run till the end of December — by another three months, according to a statement from OPEC+, which comprises the Organization of the Petroleum Exporting Countries and its allies.
The kingdom’s production will stay at around 9 million barrels a day until the end of March 2024, the state-run Saudi Press Agency said, citing “an official source from the Ministry of Energy,” after Saudi officials met with other major oil-producing nations in Vienna Thursday.
In addition to Saudi Arabia, the following voluntary barrel-per-day production cuts were announced: Russia by 500,000; Iraq by 223,000; the United Emirates by 163,000; Kuwait by 135,000; Kazakhstan by 82,000; Algeria by 51,000 and Oman by 42,000, OPEC+ said.
The group also announced after the meeting that Brazil, another major oil producer, will join at the start of next year, report my colleagues Anna Cooban and Elisabeth Buchwald. Reuters on Friday quoted the CEO of Brazil’s state-owned oil company Petrobas as saying that its production would not be determined by OPEC quotas.
Read more here.
Activist shareholder Nelson Peltz’s Trian Fund Management has launched a new proxy fight against Disney, just months after backing off from its earlier push after returned chief executive Bob Iger announced a vast cost-cutting plan for the media conglomerate.
“Investor confidence is low, key strategic questions loom, and even Disney’s CEO is acknowledging that the Company’s challenges are greater than previously believed,” Trian said in a press release Thursday.
Trian declined to comment on how many seats it is seeking on Disney’s board, but said in the release that Disney has turned down its request for representation, including for Peltz.
Disney shares rose 0.2% Thursday afternoon.
Trian’s reignition of its proxy fight comes a day after Disney revealed a shuffle to its board, with Morgan Stanley CEO James Gorman and former CEO of Sky Jeremy Darroch to join as new directors.
In response to the additions, Trian said that the moves do not “restore investor confidence or address the root cause behind the significant value destruction and missteps that this Board has overseen.”
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