Indexes Explode – by Justin Vaughn – Options Trading Report

(Justin Vaughn, Editor, Options Trading Report)

November proved to be the best month of the year as stocks and indexes finished Friday at record levels. Chips and techs were the biggest boosters as the shortened week gave November its final thrust. The Dow Jones Industrial Average finished just below 454000 and S&P 500 hovered near highs. According to Dow Jones Market Data, the Russell 2000, with more conservative value loaded stocks, blazed to an 11% monthly gain as ‘big’ dollars flowed into the small cap stock index. All indexes have been stronger daily since Donald Trump won the election, with the S&P 500 up 26%, the Dow Jones up 20% and the tech heavy Nasdaq Composite surging 30% for the year, so far. With a continuing bullish market, helped by the Trump victory, the finish of 2024 could see indexes perched at records. In the past years, December has been an unusually strong market month as investors and traders look forward to the blistering pace of November to continue into December. “Optimism regarding the arrival of Santa Claus won’t be limited to children,” said Jose Torres, senior economist at Interactive Brokers. Bonds fell Friday, with the 10-year Treasury yield dropping to 4.192%. Bitcoin again flirted with $100,000, then trending down to the $92,000 level. Bank of Japan is nearing a raise of interest rates as the country deals with an uptick of inflation.

Both the Nasdaq Composite and S&P 500 opened Monday with their ‘afterburners’ on in full force, again with the indexes setting records as the market kicked off December in high gear. President Vladimir Putin ruffled President-elect Trump feathers by commenting that a proposed currency, BRICS (Brazil, Russia, India, China, and South Africa) would ‘rake-on’ the Dollar, with Trump threatening to enact a 100% tariff on those participants, stirring world backlash. The Dollar, the most trusted currency in the world and used by a majority of nations as their preferred currency for trading, was immediately stronger against most currencies. The Chinese Juan, the Russian Ruble have both suffered lower valuations. The Ruble held up for Russia during the first war year with Ukraine, now losing serious value as sanctions have taken hold. The Juan has edged lower this past year, with China losing nearly all their once financial dominance in Hong Kong and losing their one time strong manufacturing superiority.

The Bureau of Labor Statistics, released Tuesday will guide and direct the Fed in their decision for a rate cut. Friday’s job’s report will also give pertinent data to the Fed as well as the actual unemployment rate, now at 4.1% and expected to rise to 4.2%. Traditionally, the desired unemployment rate of 4% is very reachable. “The payroll numbers are going to be a real challenge to interpret given the bounce back from the hurricane and strike data,” said Greg Wilensky, head of U.S. Fixed Income at James Henderson Investors. The Labor Department said on Tuesday that “the Labor market was solid.”

Indexes exploded Wednesday as they soared to new records, fueled by better than anticipated earnings by the techs and chips as investors hastened to the market. Mr. Powell, speaking at the New York Times RealBook Summit said, “The U.S. economy is remarkably in good shape and that the Fed can afford to be a little cautious.” So far this week the Magnificent 7 has outgained the S&P 500 for the first 3 days this month, gaining 2% across the board. Bitcoin continued strong, cresting $100,000 settling for now near $99,000 on Friday.

RUMBLINGS ON THE STREET

Susannah Streeter, Head of money and markets at Hargreaves Lansdown, WSJ – “There is still quite a lot of euphoria around and I think it’s linked to investors thinking the most detrimental effects of Trump’s tariffs might not come to pass, the jury is still out.”

Richard Moore, Head of U.K.’s MI6 WSJ – “If Putin is allowed to succeed in reducing Ukraine to a vassal state, he will not stop here, “ said Mr. Moore. “The cost of supporting Ukraine is well known, but the cost of not doing so would be infinitely higher.”

Eric Boyd, Microsoft Corporate Vice President of Azure AI Platform, speaking to Barron’s – “What we’re learned in this era of generative AI is that not only is scale important to model innovation, but so are advancements in areas like grounding and reasoning.”

Callie Cox, Chief Market Strategist at Ritholtz Wealth Management, WSJ – “For most of the year the narrative has been around a small set of stocks leading the rest of the market higher, and that’s just not the case any more,” Ms. Cox said. The rally in the stock market has really broadened out over the last few months. This day of records reflects that.”