(Justin Vaughn, Editor, Options Trading Report)
Fed Chair Jerome Powell announced a quarter point interest rate cut last Thursday; he and the Board of Governors felt it prudent and wise to keep on the offensive in the inflation fight. The general market was undisturbed by the move, having ‘built-in’ the expected cut. “We are committed to maintaining our economy’s strength,” Federal Reserve Chair Jerome Powell said at a news conference after the announcement. He made it clear he would not resign and would complete his 4-year term which finishes in May 2026. Trump has indicated all Federal employees in the fiscal sector would be fired as he takes office in January. Stocks soared Wednesday after Trump won the White House and again Thursday as the rate cut settled in. The week ended on a high note with the indexes all surging. The Dow Jones Industrial average nudged 44,000, up 4.6%, while the S&P 500 closed near a record 6000, both epic highs. The Russell 2000 (made up of smaller value stocks and unknown techs) blazed higher as tech profit flowed into the index, up a whopping 8%, the highest in four years. The University of Michigan Consumers Sentiment Survey was higher for the fourth straight month, good data showing the pulse of the nation. Bitcoin began to soar after the election as Mr. Trump’s commentary suggesting he is in favor of ensuring efforts to legitimize the fiscal usage of cryptocurrencies in the U.S. At Friday’s close Bitcoin was trading at a record high of $77,000, showing no sign of letting up.
Monday continued the Bitcoin ride, marching up to an $87,000 peak, with more new buyers jumping in. The indexes were all stronger, spurred on by President Elect Trump’s continued positive remarks and his projected forthcoming fiscal policies. The Dow Jones Industrial Average crested 44,000, closing at 44,293, a new record, after charging ahead over 300 points, again driven by an avalanche of bullish buying. Gold skidded Tuesday to $2,611.20 a troy ounce, dropping as per usual as stocks were higher for nearly a week. Oil was down 2.8% as reserves are building and some major producers have slowed production.
Stocks turned on Tuesday sliding, as the Dow Jones Industrial Average dropped 350 points, while the S&P 500 and Nasdaq Composite were off 0.2% and 0.1% respectively. While the market was nervous and negative, the bond market was stronger with the 10-year Treasury yield edging higher, gaining 12 basis points and finishing at 4.43%. As the indexes hovered near flatline, bond yields crept higher as the market dimmed, waiting for The Bureau of Labor Statistics release of the October Consumer Price Index report. Projected to come in by FactSet in the close range of 2.5%, year over year. Also the release of Producer Price Index (PPI) is due Thursday.with economists looking for an increase to 2.3% year-over-year for October, up from 1.8% for September. Both reports are key pieces of data, useful to the Fed in managing future rate cuts.
The CPI (Consumer Price Index) released Wednesday came in at 2.6%, up 0.2% over September. Bitcoin hit another new high, jumping above $90,000. Just since the election Bitcoin has gained 17%. Stocks and cryptocurrencies drifted lower Thursday as investors and traders took profits and adjusted portfolios. Stocks drifted lower as all three indexes were ‘hesitant’ while the market digested much data released throughout the week. Most stocks are at or near record highs, after surging since the election. Underlying hopes for a rate cut for December appear realistic after numerous remarks by Mr. Powell to that effect. Bitcoin dropped a bit, presently at $87,936, after a torrid run the past six days.
RUMBLINGS ON THE STREET
David Donabedian, chief investment officer of CIBC, Private Wealth, WSJ – “You have the potential for stronger economic and profit growth at the same time the Fed is becoming more friendly on the monetary policy front.”
Michael Sansoterra, chief investment officer at Silvant Capital Management, WSJ – “The economy is in really good shape, and earnings have reflected that.”
Julian Emanuel and Team, Evercore ISI, Barron’s – “This market will be driven higher by the policy prospect of deregulation in D.C. driving a capital market cycle. Exuberance tends to arrive when capital markets ignite, and exuberance has bee the hallmark of every market top. Exuberance lies ahead.”
Sundar Pichai, CEO of Alphabet, wrote on X, Barron’s – “We are in the golden age of American innovation and are committed to working with his administration (Trump) to help bring the benefits to everyone.”