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Equity futures point to the stock market giving back some of its post-November Consumer Price Index (CPI) report pop this morning. Whether those futures turn around may hinge on the data found in this morning’s November Producer Price Index (PPI) report, which is expected to show core PPI for the month tick higher to 3.2% YoY but inch lower to 0.2% on a MoM basis.
Should the sequential core PPI come in as expected, it would support the market’s growing view the Fed will deliver another 25-basis point rate cut next week. However, other recent data, including yesterday’s core CPI reading of 3.3% YoY for the third consecutive month, that renews the view inflation remains sticky suggests next week’s updated set of Fed economic projections will be the item to watch.
Rate cuts were also a topic emanating from China this morning. Top officials led by President Xi Jinping vowed to deliver rate cuts and lower the reserve requirement for banks during a two-day huddle of the Central Economic Work Conference in Beijing. Despite the call for more stimulus by economists, odds are a more detailed plan won’t be unveiled until March during the annual legislative sessions.
Investors will pick over quarterly results this morning from Ciena (CIEN), but odds are we’ll see greater emphasis on those from Broadcom (AVGO) and Costco (COST) after today’s market close. As they thumb through these results, we suspect a close eye will be kept on the market’s technical setup, especially with the Nasdaq Composite once again back in overbought territory following yesterday’s strength in the Mag 7 stocks. But we can’t rule out further upside in the S&P 500 as market seasonality dynamics come into play.
Data shows that since 1950, the S&P 500 has generated an average return of 1.3% during December. With last night’s close, the S&P 500 is up 0.9% month to date. And with the days ticking down until the Christmas holiday, we’re already hearing chatter about the potential for a Santa Claus rally.
The term, coined by trading expert Yale Hirsch in 1972, refers to a higher-than-usual rise in stock prices around Christmas. Typically, it includes the final five trading days of a calendar year plus the first two days after New Year’s Day. Per data from Dow Jones, since 1950, the broad-based S&P 500 has had gains 78% of the time, with an average increase of 1.3% over the seven days.
Let’s not forget we still have to get through several pieces of November economic data before we get there, including next week’s Retail Sales and PCE Price Index reports. To that list, we can also add quarterly results from Micron (MU), FedEx (FDX), and Nike (NKE) and what they may say that could influence expectations for 2025.
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