November 26, 2024

Stocks rose again on Monday, and were led by those that can benefit from the most from lower interest rates and a stronger economy leading the way.

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The Dow rose to another record high from Friday with a strong gain of 440 to 44,736 led by CAT, SHW, HD, MCD and good old UNH, which tends to swing in both directions on a day to day basis.

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The S&P once again lagged with a closing advance of 18 after having been as high as an early 51 point gain which would have been a record itself and it ended at 5987. But it is getting closer to its all-time high from two weeks ago in any event.

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The Nasdaq lagged once again with a 51 point advance to 19,054 as losses in TSLA, MSTR for a change and NVDA restrained it to some extent. In fact, for whatever reason there were strong very late in the session moves as AAPL jumped up by two points right on the close from where it was and TSLA fell apart in the last 15 minutes as did BKNG and so it goes.

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And once again the recent big hero was the Russell 2000 Index of small caps which rose by 36 points to a new high of 2442, its best in three years on strength in financials at this level.

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The VIX drifted lower again on the overall upward movement in stocks and is now at 14.60 and is getting closer to what could be some support around 13 and if this happens, it could put a temporary halt to the upside.

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Treasury yields also eased in the bond market after the President-elect said he wants Scott Bessent, a hedge fund manager, to be his Treasury Secretary.

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Bessent has argued for reducing the U.S. government’s deficit, which is how much more it spends than it takes in through taxes and other revenue. Such an approach could soothe concerns that Trump’s policies may lead to a much bigger deficit, which in turn would put upward pressure on Treasury yields.

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After climbing above 4.44% immediately after the election, the yield on the 10-year Treasury fell back to 4.26% Monday, down from 4.41% late Friday. That is a notable move, and lower yields make it cheaper for all kinds of companies and households to borrow money. They could also give a boost to prices for stocks and other investments.

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That helped stocks of smaller companies lead the way, as they can feel bigger boosts from lower borrowing costs because of the need for many to borrow to grow.

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The two-year Treasury yield, which more closely tracks the market’s expectations for what the Federal Reserve will do with overnight interest rates, also eased sharply.

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After the new President’s victory, traders had reduced bets for how many cuts the Fed may deliver next year. They were worried that his preference for lower tax rates and higher spending on the border would balloon the national debt.

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This is why Wednesday’s P.C.E. report could influence how much the Fed may cut rates. Economists expect it to show that an underlying inflation trend the Fed prefers to use accelerated to 2.8% last month from 2.7% in September. Higher inflation would make the Fed more reluctant to cut rates as deeply or as quickly as it would otherwise.

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Some economists expect that to slow by the end of next year to 2.4%, but maintain that inflation would be even lower if not for expected tariff increases on imports from China and autos favored by the new President.

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In the stock market, BBWI jumped 16% after delivering stronger profit for the latest quarter than analysts expected. The seller of personal care products and home fragrances also raised its financial forecasts for the full year, even though it still sees a “volatile retail environment” and a shorter holiday shopping season this year.

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Much focus has been on how resilient U.S. shoppers can remain, given high prices across the economy and still-high interest rates. Last week, two major retailers sent mixed messages, as TGT gave a dour forecast for the holiday shopping season. It followed WMT which gave a much more encouraging outlook.

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Another big retailer, M, said Monday its sales for the latest quarter were in line with its expectations, but it will delay the release of its full financial results. It found that one employee had intentionally bid up to $154 million in delivery expenses, and it needs more time to complete its investigation. Its stock fell as a result.

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Among the market’s leaders were several companies related to the housing industry. Monday’s drop in Treasury yields could translate into easier mortgage rates, which could spur activity for housing, and most of them rose as a result.

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In the crypto market, bitcoin was trading below $95,000 after threatening to hit $100,000 late last week for the first time. This is a stock that has ridiculously high call option premiums for MSTR as well as for instance there is a 1080 call for a 403 stock with 2.5 days to go this week.

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And how about gold, which had been doing well lately, and that got blasted to the downside by $85 due to the stronger dollar and lower interest rate scenario as well.

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Third-quarter earnings season are coming to an end and the lineup for this holiday-shortened week is: yesterday – BBWI higher and SAVA sharply lower; today – A, ZM, KSS, BBY lower and DKS higher; tonight - ADI, ADSK, ANF, CRWD, DELL, HPQ, WDAY, URBN.

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Economic reports will see: today – November Consumer Confidence, November new home sales; Wednesday – October P.C.E. report, October durable goods orders, 3Q G.D.P., October personal income and spending, weekly jobless claims.