US Markets
Stock prices surged last month as positive inflation data and falling bond yields emboldened investors.
The Dow Jones Industrial Average gained 8.77%, while the Standard & Poor’s 500 Index advanced 8.92%. The Nasdaq Composite, which has led all year, picked up 10.70%.1
Inflation Eases, Bond Yields Fall
The fears that have dragged on the stock market since August evaporated in November, as fresh inflation data reaffirmed continuing progress in the fight against rising prices.
The good news on the inflation front, coupled with upbeat comments by Fed officials, helped drive bond yields lower.
Additionally, the bond market was relieved following news that a 20-year Treasury Note auction was well received.
CPI Report Sparks Rally
When October’s Consumer Price Index (CPI) report was released mid-month, showing prices flat from the previous month and a cooler-than-forecasted core CPI (excludes food and energy), stocks surged, with the S&P 500 index rising 2.9%. The yield on the 10-year Treasury dropped 19 basis points—a huge one-day move.2
Rate Hike Cycle Ending?
The combination of decelerating inflation, constructive economic data, and generally benign commentary from Fed officials over the course of the month generated an increasingly optimistic outlook that the Fed’s rate-hike cycle may be at its end, and the prospect of a rate cut sometime in the first half of 2024.
Solid Corporate Reports but Cautious Outlooks
Corporate earnings were also a key focal point in last month’s stock market actions. With 94% of S&P 500 companies reporting, 82% reported a positive earnings surprise, while 62% reported a positive revenue surprise. On a more cautionary note, 64 S&P 500 companies issued negative earnings guidance for the fourth quarter, while 32 issued positive guidance.3
With powerful gains already registered for the month, investors took a breather in the final week of trading to digest November’s exceptional gains.
Sector Scorecard
For the month, all industry sectors, except Energy (–0.72%), ended higher, including Communications Services (+7.80%), Consumer Discretionary (+10.97%), Consumer Staples (+4.13%), Financials (+10.94%) Health Care (+5.4%), Industrials (+8.83%), Materials (+8.35%), Real Estate (+12.48%), Technology (+12.90%), and Utilities (+5.14%).4
What Investors May be talking about in December
Investors’ attention is expected to shift to the two-day Federal Open Market Committee (FOMC) meeting, which ends on December 13.
The focus may be less on the actual rate decision—since the markets expect the Fed to maintain the federal funds rate at its current level.
Instead, investors may pay close attention to the wording of the FOMC statement announcing the decision and, most especially, to Fed Chair Powell’s remarks in the press conference that will follow the meeting.
Following the November meeting, Powell said that the Fed was not convinced that the inflation battle had been won and that additional progress toward its two percent inflation goal may require further restrictive monetary actions. The news unsettled investors, who had hoped that the rate hike cycle had come to an end.
While Powell is unlikely to change the substance of his message, investors will be looking for any indication that his stance has shifted.
World Markets
The MSCI-EAFE Index gained 9.09% in November on moderate inflation and hopes of interest rate cuts.5
European stocks performed strongly, with advances experienced in France (+6.17%), Germany (+9.49%), Italy (+7.19%), and Spain (+11.54%). The U.K. lagged a bit, picking up only 1.80%.6
Pacific Rim markets also saw solid gains, with Japan rising 8.52%. Hong Kong was the performance outlier, falling 1.65% as China continued to struggle.7
The Fed
The FOMC elected to leave rates unchanged for the second consecutive meeting. The committee’s accompanying statement pointed to an improved assessment of the economy.
In his post-announcement press conference, Fed Chair Jerome Powell said that bringing inflation to the Fed’s two percent target was a long process, leaving open the possibility of a rate hike in December.17
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1. WSJ.com, November 30, 2023
2. Finance.Yahoo.com, November 14, 2023
3. Advantage.FactSet.com, November 17, 2023
4. SectorSPDR.com, November 30, 2023
5. MSCI.com, November 30, 2023
6. MSCI.com, November 30, 2023
7. MSCI.com, November 30, 2023
8. CNBC.com, November 29, 2023
9. CNBC.com, November 3, 2023
10. WSJ.com, November 15, 2023
11. MarketWatch.com, November 16, 2023
12. MarketWatch.com, November 17, 2023
13. CNBC.com, November 21, 2023
14. Reuters.com, November 27, 2023
15. CNBC.com, November 14, 2023
16. MarketWatch.com, November 22, 2023
17. CNBC.com, November 1, 2023
18. EnterpriseAppsToday.com, May 19, 2023
19. Forbes.com, October 26, 2022
20. ThePeopleHistory.com, March 2023
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