The stock market is wavering today as Wall Street braces for two of the last major inflation reports of 2024. The major indexes are showing mixed performance, with the Dow Jones Industrial Average up 35 points, or 0.1%, while the S&P 500 and Nasdaq Composite hover near unchanged levels.
Market breadth remains weak, with only 141 S&P stocks rising and more than half of the Dow components declining. Notably, Nvidia and other chip stocks are facing selling pressure, contributing to the cautious trading environment.
Sevens Report Research’s Tom Essaye notes that the market is largely waiting for tomorrow’s consumer price index data. With the year wrapping up near record levels, Essaye suggests it would take a surprisingly hot inflation reading to significantly impact the major indexes.
“People are sort of done with 2024,” Essaye explains. “Everybody just wants to gradually drift into the end of the year. Maybe we go a little bit higher in the S&P 500, but either way it’s been a great year and nobody wants any upsets.”
Looking ahead to 2025, Essaye anticipates increased volatility as markets grapple with high valuations, impacts of the Trump administration, growth concerns, and ongoing geopolitical tensions. “At these levels, the market essentially demands a near constant stream of good news,” he notes. “And it’s gotten it!”
Small-cap stocks are showing strength after the NFIB Small Business Optimism Index reached 101.7 in November, its highest level since June 2021. NFIB Chief Economist Bill Dunkelberg attributes the surge in optimism to expectations surrounding the 2024 election results.
Treasury yields are extending gains while remaining within their October range. The 10-year yield stands at 4.234%, while the two-year yield is at 4.172%. Nonfarm productivity growth for Q3 remained unchanged at 2.2%, with labor costs revised down to 0.8% from 1.9%.
In global developments, China has launched an antitrust probe into AI chip maker Nvidia, adding to market concerns. The world’s second-largest economy is also grappling with disappointing trade data, highlighting challenges in its economic recovery despite recent stimulus announcements.
Cryptocurrency markets remain active, with Bitcoin trading at $95,335, down 0.89%. MicroStrategy has made headlines by investing an additional $2.1 billion in the digital currency.
The Federal Open Market Committee is preparing for its December 17-18 meeting, with markets pricing in a 90% probability of a quarter-point rate cut. However, expectations for January are more tempered, showing just a 21% chance of consecutive cuts according to CME’s FedWatch tool.
Geopolitical tensions continue to impact market sentiment. Recent developments include political upheaval in France, martial law declarations in South Korea, election cancellations in Romania, and regime changes in Syria.
Looking at specific sectors, U.S.-listed Chinese stocks are pulling back after yesterday’s rally, which saw the Nasdaq Golden Dragon China Index surge 8.5%. The index, comprising companies doing majority business in China, is experiencing profit-taking amid renewed economic concerns.
Oil prices are showing modest gains, with crude trading at $68.91, up 0.79%, as Middle East turmoil and Chinese economic prospects influence the market.
The VIX, often called the fear index, is down 0.56% at 14.11, indicating relatively calm market conditions despite the various global challenges.
As 2024 draws to a close, the S&P 500 has gained 27% year-to-date, while the tech-heavy Nasdaq Composite is up 31%. These impressive gains set the stage for what could be an eventful start to 2025, particularly as markets digest tomorrow’s crucial inflation data and next week’s Federal Reserve decision.
