S&P 500 Rebounds as Investors Focus on 2025-Q2

The S&P 500 (Index: SPX) rebounded in the pre-Thanksgiving holiday week of trading. The index rose 1.7% from where it ended the previous week, closing at 5,969.34 on Friday, 22 November 2024.

The biggest driver of stock prices continues to be expectations for how the Federal Reserve will be setting interest rates in 2025. The CME Group’s FedWatch Tool continues to anticipate the Fed will reduce the Federal Funds Rate by 0.25% when its Federal Open Market Committee concludes a two day meeting on 18 December 2024. More significantly, the FedWatch tool’s projections for all of 2025 indicate just one more rate cut is expected, a quarter point reduction on 18 June (2025-Q2). The tool expects the Federal Funds Rate will bottom at a target range of 4.00-4.25%.

Since that single rate cut now expected in 2025 would take place in 2025-Q2, that explains why investors are focusing on that distant future quarter as they set current day stock prices. The latest update of the alternative futures chart shows the trajectory of the S&P 500 just below the bottom of the range that we would expect to most likely find it for when investors focus their forward looking attention on 2025-Q2.

Since the alternative futures are projected to dip below where the S&P 500 is currently positioned in the week ahead, we can argue the market regime that has been in place since 9 March 2023 is still holding. We’re still keeping an eye out for indications of a change in market regime.

With the Thanksgiving Day holiday weekend coming up, we anticipate a slow flow of market moving news in the week ahead. Here are the past week’s market moving headlines:

Monday, 18 November 2024

• Signs and portents for the U.S. economy:

• Oil prices rise over 3% on Sverdrup outage, Ukraine war escalation
• US single-family housing starts slump; high mortgage rates remain a challenge

Fed minions find more untamed inflation to fight:

• US labor market still boosting inflation, San Francisco Fed economists say
• Fed hawks and doves: what US central bankers are saying

Bigger trouble developing in China:

• China’s export tax bombshell rocks aluminium market
• Chinese exporters to hike prices, renegotiate contracts after tax rebate cuts, sources say

BOJ minions setting stage to leave interest rates unchanged, claim they’ll stop stimulus someday:

• BOJ sees progress in wage-driven inflation, keeps Dec rate hike on table
• BOJ to bid farewell to stimulus era, justify rate hikes in policy review

ECB minions more worried about inadequate growth than inflation from tariffs:

• ECB fears Trump tariff effect on growth more than on inflation
• ECB’s Nagel says Trump’s tariffs may have minor impact on inflation
• ECB’s Makhlouf: Premature to make decisions based on new U.S. administration

Nasdaq and S&P advance, Dow slides and yields stumble

Tuesday, 19 November 2024

• Signs and portents for the U.S. economy:

• Oil slips on Sverdrup field restart, geopolitical fears support

Fed minions say they don’t know how much longer they’ll cut interest rates:

• Fed’s Schmid says it is uncertain how far interest rates can fall

Bigger trouble, stimulus developing in China:

• China’s new hobbies create a spending mirage

ECB minions getting excited to cut Eurozone interest rates again:

• ECB’s Panetta calls for lower rates, forward stance, guidance

Nasdaq up 1%, S&P 500 ends higher as tech moves limit Russia-Ukraine pressure; Dow slips

• https://www.reuters.com/technology/bitcoin-breaches-94000-first-time-2024-11-20/

Wednesday, 20 November 2024

• Signs and portents for the U.S. economy:

• Oil little changed as market weighs mixed drivers
• OPEC+ may stick with deep oil cuts for longer due to weak demand

Fed minions still expected to deliver December rate cut, uncertain on inflation, future rate cuts:

• Fed to lower rates in Dec but slow pace in 2025 on inflation risks: Reuters poll
• Fed governors stake out competing views of inflation risk

• Fed’s Williams sees inflation cooling and interest rates falling further, Barron’s reports
• Fed’s Collins sees more rate cuts ahead for US central bank
• Fed’s Bowman says rate cuts are concerning
• Fed’s Bowman calls for cautious approach on interest rates

Bigger trouble developing in China:

• China leaves lending benchmark LPRs unchanged, as expected
• Trump to unleash nearly 40% tariffs on China in early 2025, hitting growth: Reuters poll

Chinese companies find solution to falling population:

• China overtakes Germany in industrial use of robots, says report

ECB minions find new problem to worry about:

• ECB warns of ‘bubble’ in AI stocks as funds deplete cash buffers

Wall Street ends mixed, Nvidia shares slip after the bell

• Bitcoin surges to record high near $95,000

Thursday, 21 November 2024

• Signs and portents for the U.S. economy:

• Oil up 2% after Russia-Ukraine missile exchange, outweighing US crude stock rises
• US natural gas drillers to lift 2025 output, reversing year of cuts
• US existing home sales rebound in October
• US 30-year fixed-rate mortgage approaches 7%

Fed minions getting more worried about untamed Bidenflation:

• Fed’s Barkin says US is vulnerable to inflation shocks, FT reports
• Fed’s Goolsbee says pace of rate cuts may need to slow

Bigger stimulus developing in China:

• Exclusive: China advisers call for steady 5% 2025 economic growth goal, stronger stimulus

ECB minions worry about Eurozone getting into more trade wars, thinking about how to grab more power:

• ECB warns of ‘sizeable’ hit to growth from a trade war
• Trump and Europe: ECB policymakers say EU must complete shelved projects to tackle threat

Wall Street closes higher as Dow, S&P hit one-week tops

• Dow ends up 1%, S&P gains with Nvidia sloughing off loss; Nasdaq tips into the green
• Bitcoin marches towards $100,000 on optimism over Trump crypto plans

Friday, 22 November 2024

• Signs and portents for the U.S. economy:

• Oil prices settle up 1% at 2-week high as Ukraine war intensifies
• US existing home sales rebound in October

China signals its looking for trade deal with U.S.:

• China says it is willing to talk with US to push forward bilateral trade

• China announces policy measures to boost trade amid worries over Trump tariffs

BOJ minions signal they’ll attempt another rate hike to combat Japan inflation in December 2024:

• BOJ to hike rates in Dec as yen weakens and Trump returns, majority of analysts say: Reuters poll
• Japan’s inflation holds above BOJ target, fanning Dec rate hike bets
• Japan’s factory activity extends declines on sluggish demand, PMI shows

ECB minions getting excited to deliver more rate cuts, wonder what to do with Germany as sick man of Eurozone:

• More ECB cuts are coming but Dec discussion must wait, Nagel says
• Vulnerable Germany heaps pressure on ECB

Dow climbs 1%, S&P, Nasdaq advance as Wall Street’s key averages cement weekly wins

• Wall Street closes higher after business activity data

• US business activity gauge rises to 31-month high in November

The Atlanta Fed’s GDPNow tool‘s projection of the real GDP growth rate for the current quarter of 2024-Q3 ticked up to +2.6% from the previous week’s +2.5%.

On a programming note, we’re going to break away for our annual celebration of the Thanksgiving holiday this week. The next edition of our

Image credit: Microsoft Copilot Designer. Prompt: “An editorial cartoon with a Wall Street bull and a bear playing basketball, with the bull rebounding”. We have to admit the AI did a great job with the bull. As for the bear, with how good the bull came out, we can only assume that AI believes bears are bad at basketball.