Daily market snapshot

• Stocks finish higher, capping a strong week: U.S. equity markets finished higher on Friday, finishing off a strong week that saw the S&P 500 gain 1.7%.* Today's leadership favored value-oriented sectors, with consumer staples, financials and industrials among the top performers.* Small-cap stocks outperformed as well, with the Russell 2000 Index gaining over 1.5% today and more than 4% on the week.* Overseas, European markets traded higher while Asian markets were mixed overnight, with Japan's Nikkei finishing higher but China stocks sharply lower.* Bond yields were little changed, with the 10-year Treasury yield closing around the 4.4% mark, while the 2-year Treasury yield ticked up to 4.38%.* On the economic front, the November preliminary estimate for the U.S. composite PMI rose to a 31-month high, signaling ongoing economic momentum.*
• Focus shifts back to inflation: Inflation, and its implication on future monetary policy, will be back in focus next week with the release of personal consumption expenditures (PCE) inflation on Wednesday. Market expectations are calling for headline PCE to rise by 2.3% year-over-year, up from the prior months gain of 2.1%.* Core PCE is expected to tick higher as well, with expectations for a 2.8% annual gain, up from 2.7% in the prior month.* Consumer price index (CPI) inflation, which was released earlier this month, suggested the path to the Fed's 2% target could be bumpy. Core CPI rose by 3.3% annually, while the three-month annualized rate of core CPI rose to 3.6%.* Current market expectations are calling for a 60% chance of another 0.25% Fed rate cut at its December 18 meeting.** We'd align with markets that another quarter-point cut at the December meeting is a probable outcome. However, with inflation proving persistent in recent months, the U.S. economy on strong footing and the potential for inflationary fiscal policy over the coming year, we believe the Fed could take a more cautious approach to rate cuts in 2025.
• PMI data point to weak activity abroad: Preliminary estimates for the November S&P Global Purchasing Manager Index (PMI) point to continued weakness in economic activity abroad. The eurozone composite PMI fell to 48.1 (a reading below 50 signals contraction), the lowest reading since January.* A large driver behind eurozone weakness has been sluggish activity from the region's largest economy, Germany. The German composite PMI fell to 47.3 in today's reading and has been in contraction since June.* Weak manufacturing activity has been a drag on Germany and the broader eurozone. In fact, both the German and eurozone manufacturing PMIs has been in contraction since June 2022.* Eurozone producer price inflation surged in 2022 due to the war between Russia and Ukraine, weighing on profitability for manufacturers. While prices have since started to moderate, headline eurozone PPI is over 30% higher today than at the start of 2021.* Looking around the horn, activity didn't fare much better in the U.K. with the composite PMI falling to 49.9, the first contraction since October 2023, while Japan's manufacturing PMI fell to 49, the fifth consecutive month of contraction.* Contrarily, the U.S. composite PMI rose to 55.3, a 31-month high, driven by strength in the services sector.* We continue to favor the relative economic momentum of the U.S. relative to international regions. As part of our opportunistic asset-allocation guidance, we recommend investors consider underweighting international developed stocks and reallocate toward U.S. large- and mid-cap stocks.

Brock Weimer, CFA
Associate Analyst

^{Source: *FactSet **CME FedWatch Tool}

• Stocks finish higher: Major equity markets closed higher on Thursday, with earnings results from the world's largest company, NVIDIA, in focus. Leadership was broad-based, with most sectors of the S&P 500 finishing higher, led by utilities and financials. Communication services was a laggard, falling by nearly 2% in response to a statement from the Department of Justice on Wednesday that Google should have to sell off its Chrome browser to address the monopolization of the online search market.* Small-cap stocks were a notable outperformer, with the Russell 2000 Index higher by more than 1.5%.* Overseas, European markets closed higher, while Asian markets were mostly lower overnight. Bond yields closed modestly higher, with the 10-year Treasury yield finishing around 4.42% while the 2-year yield ticked up to 4.35%.* In the commodity space, oil prices closed higher by roughly 2%, as concerns about an escalation in the war between Ukraine and Russia remain in focus.
• NVIDIA delivers strong results: With the economic calendar light this week, market focus is centered on earnings results from the world's largest company by market-cap, NVIDIA. NVIDIA announced quarterly earnings per share of $0.81 and revenue of $35 billion after the close yesterday, both of which were better than analyst expectations.* On a year-over-year basis, sales were higher by 94% while earnings per share were up 103%.* Strong performance from the company's data-center segment drove strong results as AI adoption continues to grow. While this quarter indicates ongoing robust demand for NVIDIA's chips, the midpoint for management sales guidance in the current quarter was only 1% above analyst expectations, the lowest since 2022.* After opening the day lower, the stock finished higher by roughly 0.5%.
• Jobless claims data point to healthy labor-market conditions: Initial jobless claims for the prior week were 213,000, below expectations for 220,000 and below the previous week's reading of 219,000.* After a brief spike to 260,000 in early October, jobless claims have quickly receded and remain well below the 30-year median of 326,000.* With the labor-market in good shape and the recent CPI inflation report suggesting the path to the Fed's 2% target could be bumpy, markets are pricing in only a 50% probability of a 0.25% rate cut from the Fed at its December meeting.** In our view, another 0.25% cut from the Fed is likely in December. However, resilient economic activity and inflation running above the Fed's 2% target will likely lead to a shallower rate-cutting cycle in 2025.

Brock Weimer, CFA
Associate Analyst

^{Source: *FactSet **CME FedWatch Tool}

• Stocks finish slightly lower as yields and the dollar rise - In the absence of major economic releases and ahead of NVIDIA's earnings, equity-market moves were muted today. The consumer sectors were under pressure, with shares of Target down about 20% after the retailer cut its full-year earnings outlook, warning that a flat sales quarter and a buildup in inventory hurt profitability*. The disappointing results are in stark contrast with the strong earnings Walmart reported yesterday. Elsewhere, European stocks were slightly higher, but U.K. stocks lagged after the latest inflation report came in hotter than anticipated, implying fewer Bank of England rate cuts. The U.S. dollar strengthened near the highs for the year, and the 10-year U.S. Treasury bond yield rose to 4.41%*.
• All eyes on NVIDIA's results - After a nearly 200% gain so far in 2024, NVIDIA has become the world's most valuable company, carrying a $3.6 trillion market capitalization*. Given its outsized importance and influence on key indexes, investors will be closely watching the quarterly earnings results and outlook when the company reports after the market close today. Analysts are expecting another strong quarter driven by robust demand for artificial intelligence, with earnings growing 86% from a year ago*. NVIDIA is the last mega-cap tech company to report, marking the near end of the third-quarter earnings season. About 95% of the S&P 500 companies have reported earnings, with 75% exceeding expectations and delivering 6.6% earnings growth, up from the 4.5% expected at the start of the earnings season*. After two back-to-back years of valuation expansion, we think earnings growth will be key in driving further stock-market gains in 2025.
• Three key catalysts before year-end - Stocks remain on track for a strong finish to the year, underpinned by solid economic growth, rising earnings, and the start of a rate-cutting cycle. With the holiday season fast approaching, there are a handful of remaining key datapoints left to drive the market narrative. On December 6 investors will be focusing on the jobs reports to gauge the strength of the labor market. Last month's data was distorted by the hurricanes and strikes, so the upcoming release might provide a clearer picture of the underlying trend. Next will be the December 11 CPI release, the last inflation reading before the Fed's December meeting and rate announcement on December 18. We expect another quarter-point rate cut, bringing the policy rate to 4.5%-4.75%, but we will be looking for hints that the Fed will take a slower approach next year. Resilient economic growth, potentially looser fiscal policy, and an aggressive stance on tariffs and immigration may pose upside risks to inflation, which is why the bond market is looking for a shallower interest-rate-cutting cycle, with potentially two rate cuts in 2025 instead of almost five expected two months ago*.

Angelo Kourkafas, CFA
Investment Strategist

^{Source: *FactSet}

• Nasdaq leads stocks higher, shaking off Russia-Ukraine concerns – Major equity markets rose on Tuesday amid rising geopolitical tensions, as Ukraine began using U.S.-made weapons in Russian territory. Sector performance was mixed, as technology and communication services stocks posted the largest gains. In global markets, Asia was higher, as markets assessed commentary from the Bank of China ahead of the bank's interest-rate decision on Wednesday. Europe was broadly lower in a risk-off trading session. The U.S. dollar declined versus major currencies. In the commodity space, WTI oil and gold traded higher.
• Walmart earnings results provide look at consumer as focus turns to NVIDIA – Walmart released its third-quarter results, showing revenue grew 5.5% year-over year, above estimates calling for 4.3% growth*. The company also reported strong customer traffic across business segments. We believe these results provide another data point that reflects a resilient consumer going into the holiday season. Artificial intelligence (AI) leader NVIDIA will release its third-quarter earnings results on Wednesday, with estimates calling for earnings per share of $0.75. With 93% of companies in the S&P 500 having reported, earnings are on pace for about 5.5% growth year-over-year. Results have been strong relative to expectations, with 75% of companies beating analyst estimates*. Earnings growth has been broad, with seven of the 11 sectors delivering higher earnings*.
• Bond yields edge lower: Bond yields were down, with the 10-year Treasury yield at 4.39%. The recent decline is a reversal of the broader trend higher in recent weeks, as bond markets have reduced expectations for Federal Reserve (Fed) interest-rate cuts**. The Fed's dual mandates of maximum employment and stable prices are returning to better balance as the labor market normalizes from a period of outsized strength and as inflation gradually moderates, which should keep the Fed on track to continue cutting rates, though the pace is likely to slow, in our view.

Brian Therien, CFA
Investment Strategy 

^{Source: *FactSet ** CME FedWatch}

• Stocks start the week higher – Major equity markets rose on Monday, regaining some of their losses from last week. Sector performance was broad, as energy and communication services stocks led markets higher. In global markets, Asia was mixed, as markets await the Bank of China's interest-rate decision on Wednesday and inflation data from Japan on Friday. The U.S. dollar declined versus major currencies. In the commodity space, WTI oil was up following an escalation in Ukraine and a production disruption in Europe*.
• Focus turns to NVIDIA results as corporate earnings season winds down – Artificial intelligence (AI) leader NVIDIA will release its third-quarter earnings results on Wednesday, with estimates calling for earnings per share of $0.75. With 92% of companies having reported, earnings are on pace for about 5.4% growth year-over-year. Results have been strong relative to expectations, with 74% of companies beating analyst estimates*. Earnings growth has been broad, with seven of the 11 sectors delivering higher earnings*. The sectors forecast to have lower earnings – energy, industrials, materials and utilities – represent about 17% of the market capitalization of the S&P 500*.
• Bond yields edge lower: Bond yields declined modestly, taking a break from their trend higher over the past several weeks. The 10-year Treasury yield has risen about 80 basis points (0.80%) since the recent low in September, as bond markets have reduced expectations for Federal Reserve (Fed) interest-rate cuts**. Yields have also been driven by higher bond market inflation expectations, currently about 2.35% over the next 10 years, measured as the difference between Treasury note and Treasury Inflation Protected Securities (TIPS) yields***. The Fed's dual mandates of maximum employment and stable prices are returning to better balance as the labor market normalizes from a period of outsize strength and inflation gradually moderates, which should keep the Fed on track to continue cutting rates, though the pace is likely to slow, in our view.

Brian Therien, CFA
Investment Strategy 

^{Source: *FactSet ** CME FedWatch *** Federal Reserve Bank of St. Louis}