November 8, 2024 – Well, you'd have to be living under a rock to not know what drove the markets this week. The election results and the policy decision from the Federal Open Market Committee on Thursday were key players in moving stocks and bonds.
Hi, I'm Ryan Puplava, financial advisor and market technician with nearly three decades of experience in financial services. Since 2005, I've been providing technical analysis and market commentary for FinancialSense.com, and I've been a podcast contributor since 2011, discussing key market-moving catalysts. For me, the core of my work as an investor is blending the "what happened?" of technical analysis with the "why" of market news. Pairing the two brings clarity that technical analysis alone doesn't give. During earnings season, I'll dive into the weeds to hear what company's results show and what may be driving their success or difficulties. So, here's what moved the market this week.
Investors began to discount the removal of the election uncertainty on Tuesday, as the polls opened for voting. The S&P 500 rose 1.2%, the Nasdaq Composite gained 1.4%, and the Dow Jones Industrial Average climbed 0.4% higher. Stocks were also helped by the ISM Services PMI for October, which increased to 56% from 54.9% in September. The key takeaway is that the largest component of the economy is at a two-year high with the employment component turning again to expansion.
Investor reaction on Wednesday to the election results was remarkable, with evident relief that the outcome wouldn't be disputed as Trump secured both the popular and electoral votes. While vote counting is ongoing in some states still, the GOP currently leads in the House with 211 seats compared to 199 for the Democrats. In the Senate, the GOP is presumed to hold the majority at 53 seats to the Democrats' 47, following Democratic Senator Jackie Rosen's victory in Nevada.
Financials led Wednesday's top performers, climbing 6.2% on optimism that Trump's proposed tax cuts and deregulation will boost economic growth, which is already exceeding many expectations. Looking at Fed Chair Powell, who even noted surprise at the economy's resilience in his recent speech, strategists like Francois Trahan have shifted their outlook, calling the election a game changer, while Michael Kantrowitz at Piper described it as a re-rating of equities. Standout gains included Goldman Sachs up 12.2%, Key Corp up 15.7%, and Discover Financial Services up 20.3%.
Tesla saw significant gains this week as well, up 29%, reaching a trillion-dollar market cap, partly due to Elon Musk's connections with Trump. Rates initially rose in response to the election results, with the two-year Treasury yield reaching 4.29% and the ten-year note hitting 4.48%. Driven by optimism about growth and lingering inflation concerns, points I highlighted in my "Grading on the Curve" article last week as contributing to rate increases since the Fed's September decision. Consequently, the real estate sector down 2.6%, utilities down 1%, and consumer staples down 1.6% were the day's weakest performers amid the risk-on market sentiment.
Interestingly, a 30-year Treasury auction raising $25 billion in funds saw robust demand, which helped ease rates, bringing the two-year yield down to 4.27% and the ten-year to 4.43% by the close.
Momentum from Wednesday's gains carried into Thursday, with help from investors fearing they'd be missing out on continued gains and by economic data that came close to expectations. Weekly initial claims rose slightly to 221,000. Preliminary third-quarter productivity was up 2.2%, and labor costs were up less at 1.9%. The ratio being significant.
The Fed's decision to cut rates 25 basis points came as expected. Stocks were up mainly because Chairman Powell didn't take future rate cuts off the table, and he reiterated that the Fed is on a path to neutral with no preset course, and they'll wait to see where the data leads them each meeting. Powell wants to continue to see progress on inflation while maintaining strength in the labor market, citing the labor market is not a source of significant inflationary pressure now. Regarding the government's fiscal policy, he noted the Fed hasn't accounted for any policy changes with the lack of specifics, but he said the country is on an unsustainable path in reference to our debt. When asked about what he'd do if Trump fired him, he stated the President's firing or demoting him is not permitted under the law. His full term as chair will expire in 2026, of which he's already stated in July he plans to serve completely.
Three other news items this week that were important. The Wall Street Journal reported on Monday that Iran is planning a strong and complex response to retaliation for Israel's recent attacks. West Texas Intermediate was up 2.8% on the day to $71.48 a barrel and finished the week at $72.36 a barrel. Also, on Monday, it was announced Nvidia and Sherwin-Williams will be replacing Intel and Dow, Inc. in the Dow Jones Industrial Average effective prior to trading this Friday. Finally, China announced $1.4 trillion over the next five years to help buoy local government debt. However, the impact isn't likely to support consumers.
And that covers this week's key financial catalysts. If you'd like to get the full weekly wrap-up, my monthly financial planning articles and monthly big picture and technical analysis reports straight to your email, feel free to email me at ryan[dot]puplava[at]financialsense[dot]com.
Content is for informational purposes only and does not constitute financial, investment, legal, or other advice. There are risks involved in investing, including the potential for loss of principal. Forward-looking statements are based on assumptions that may not materialize and are subject to risks and uncertainties. Any mention of specific securities or investment strategies is not an endorsement or recommendation.
Advisory services offered through Financial Sense® Advisors, Inc., a registered investment adviser. Securities offered through Financial Sense® Securities, Inc., Member FINRA/SIPC. DBA Financial Sense® Wealth Management. Investing involves risk, including the loss of principle. Past performance is not indicative of future results.
