The S&P 500 (SP500) Friday advanced by 0.77% for the week to close at 4,594.63 points, posting gains in three out of five sessions. Its accompanying SPDR S&P 500 Trust ETF (NYSEARCA:TO SPY) added 0.83% for the week.
During this week, Thursday marked the end of November, a month that turned out to be historic for the markets. The S&P benchmark index (SP500), as well as the Nasdaq Composite (COMP.IND) and the Dow (DJI), recorded their best monthly growth this year and one of their best Novembers on record.
This rise was largely driven by favorable economic data and comments from Federal Reserve speakers that led to a general consensus that the central bank is finished raising rates and can proceed with a soft landing – an event in in which inflation falls without compromising employment or growth.
A similar trend contributed to this week’s gains and led to the S&P 500 (SP500) reaching its highest closing level of the year. This leaves the market ready for a strong end to the year, with Friday being the first day of December. Investors are hoping that November’s momentum can carry over into a “Santa Claus” rally.
The week started with the retail sector in the spotlight, after Cyber Monday followed last week’s Black Friday. new records for expenses. Two economic indicators attracted attention on Wednesday and Thursday: the first, the second estimate of US GDP growth in the third quarter has been revised upwards. Then on Thursday personal income and expenses report showed M/M and Y/Y moderation in the Fed’s preferred inflation indicator – the Personal Consumption Expenditures Price Index. Both sets of data significantly boosted hopes for a soft landing.
Fed Chairman Jerome Powell gained attention Friday with some comments during a fireside chat at Spelman College. Powell in his opening remarks attempted to quell market enthusiasm in terms of rate cut expectations, saying it was still too “premature” to conclude that monetary policy was sufficiently restrictive. However, once the fireside chat began, Powell’s responses to questions were much more positive and all but confirmed to traders that the central bank would not raise rates again.
Before Powell, there were notable positive comments from the Fed governor. Christopher Waller Tuesday and the president of the Chicago Fed Austan Goolsbee earlier today.
Continued favorable economic data also led investors to stock up on bonds this week, pushing Treasury yields lower and helping stocks. The long-term 10-year yield (10 American years) slipped by 26 basis points while the short-term 2-year yield, more sensitive to rates (US2Y) slipped 40 basis points. Demand for bonds also received scrutiny in the form of Treasury auctions this week – a $54 billion 2-year auction closed on Monday while an auction of 55 billion dollars at 5 years took place. Tuesday’s auction of $39 billion over 7 years was followed by a significant margin.
See how Treasury yields impacted the entire curve on the Seeking Alpha bonds page.
Let’s move on to the weekly performance of the S&P 500 (SP500), nine of the 11 finished in the green, led by an outsize jump of around 5% in real estate. Communication services and energy were the main losers. See below for a breakdown of sector performance along with the accompanying SPDR Select Sector ETFs from the November 24 close to the December 1 close:
#1: Real Estate +4.99%and the Real Estate Select Sector SPDR ETF (XLRE) +4.65%.
#2: Materials +2.57%and the Materials Select Sector SPDR ETF (XLB) +2.75%.
#3: Industrial +2.14%and the Industrial Select Sector SPDR ETF (XLII) +2.26%.
#4: Financial data +2.09%and the Financial Select Sector SPDR ETF (XLF) +2.23%.
#5: Discretionary consumption +1.48%and the Consumer Discretionary Sector SPDR ETF (XLY) +1.69%.
#6: Utilities +1.27%and the Utilities Select Sector SPDR ETF (XLU) +1.34%.
#7: Basic consumption +0.55%and the SPDR Consumer Staples Select Sector ETF (XLP) +0.77%.
#8: Healthcare +0.48%and the SPDR Health Care Select Sector ETF (XLIV) +0.53%.
#9: Information Technology +0.34%and the Technology Select Sector SPDR ETF (XLK) +0.63%.
#10: Energy -0.11%and the Energy Select Sector SPDR ETF (XLE) +0.11%.
#11: Communication Services -2.49%and the Communications Services Selected Sector SPDR Fund (XLC) -1.48%.
Below is a chart of the year-to-date performance of the 11 sectors and their performance relative to the S&P 500 (SP500). For investors considering the future of what’s happening, take a look at the Search Alpha Catalyst Watch to see next week’s breakdown of actionable events that stand out.
