Major US stock indexes treaded water in early Monday trading after Wall Street returned from the Thanksgiving holiday weekend. The muted open came despite stocks remaining firmly on track to post their strongest monthly gain since mid-2022.
The benchmark S&P 500 and blue-chip Dow Jones Industrial Average both traded near the flatline after kicking off the week’s final session. Each index is up well over 5% in November, putting equities on pace to snap a three-month losing skid thanks to rekindled optimism that the Fed may pause its fierce rate hike regime soon.
The tech-centric Nasdaq Composite edged 0.2% lower as stocks took a breather following four consecutive winning weeks. Still, with Cyber Monday sales still filtering in, investors are closely monitoring consumers’ holiday spending patterns for further clues into the health of the US economy amid stubborn inflation.
Stocks Shrug Off Lackluster Open With Banner Month Nears Finish
At the closing bell on Friday, the S&P 500 closed out its fourth straight weekly advance to extend November’s eye-popping surge to 6.8%. The blue-chip Dow booked its third winning week in the past four, up 1.8% over that span. The Nasdaq rose 1.7% for the week, bringing its November leap to 6.5%.
The recharged rally lifted the VIX volatility index to lows not seen since January 2020, reflecting easing investor anxiety about the economic outlook. US markets were closed Thursday for Thanksgiving and operated on shortened hours Friday.
On Monday, traders awaited fresh catalysts with no major economic releases on the calendar ahead of pivotal inflation and jobs figures due later in the week. Key will be personal consumption expenditures data slated for Wednesday, which encompasses the Fed’s preferred core inflation gauge. An upside surprise could jeopardize bets for slower interest rate increases going forward.
Sectors Attuned to Economic Health Take November’s Pole Position
The November rally lifted more economically sensitive pockets of the market after a brutal year that’s seen the S&P 500 fall 16% amid rapid Fed tightening. Energy and industrial stocks are on track for double-digit percentage gains this month as investors lean into shares poised to benefit from steadying prices and resilient business spending.
Meanwhile, the communication services and information technology sectors that powered markets for years are among November’s laggards. Meta Platforms’ $65 billion loss of market cap last month after weak earnings and a gloomy forecast underscores big tech’s fall from grace in 2022’s challenging climate.
Holiday Shopping Gets Spotlight With Blowout Black Friday, Cyber Monday
This year’s condensed holiday shopping timeframe has escalated the stakes for retailers hoping bargain hunters will flock to stores and e-commerce despite inflation gnawing at incomes and savings. Early indications look solid: online sales rocketed to $9.12 billion on Black Friday itself, up 7.5% from 2021 levels per Adobe Analytics.
The National Retail Federation estimates some 166 million Americans made purchases either in-store or online over the five-day Thanksgiving stretch. If that holds up, blowout Cyber Monday sales could further support the view that consumers still have money to spend on discretionary items.
With holiday retail performance potentially providing valuable clues into the direction of the American consumer, investors have plenty at stake in each seasonal sales update. More robust-than-expected spending could hint the US economy maintains enough momentum to avoid near-term recession.
Ebbing Recession Fears Collide With Rate Path Unknowns
Bolstered sentiment around the economic trajectory has powered fall’s ferocious stock rebound from mid-October’s bear market lows. But a pivot toward slower Fed tightening remains crucial to extend the rally as central bankers balance still historically high inflation against cascading impacts from their aggressive hikes.
This week’s speeches from Fed Chair Jerome Powell and Vice Chair Lael Brainard could offer valuable insights. The policymakers may specifically address Wednesday’s upcoming PCE Index print and Friday’s November jobs tally.
For now, futures markets see the Fed downshifting to a 50 basis point increase at its December 14 meeting. But sentiment remains extraordinarily fluid: less than a month ago most investors were bracing for another 75 basis point adjustment to the federal funds rate target range, which currently sits at 3.75% to 4%.
Global Growth Headwinds Add to Investor Unease
Beyond domestic issues, overseas challenges further muddle the demand outlook that will ultimately dictate inflation’s path. Strict ongoing COVID-19 restrictions are stifling economic activity in China, the world’s second largest economy. Meanwhile, Europe’s energy crisis and related sky-high utility costs threaten to trigger a painful regionwide recession this winter. The fallout could dampen performance at US multinationals heavily exposed to international markets.
Key Index Levels Still Suggest Stocks Vulnerable to Setbacks
From a technical perspective, the S&P 500 remains comfortably situated above its 200-day moving average after recapturing that widely tracked trendline last week for the first time since April 2022. Still, with macro crosscurrents continuing to whip markets around, most analysts caution it is far too early to declare stocks are off to the races.
Indeed, at around 4,045 the S&P remains deeply below former support in the 4,100 to 4,300 zone that could resist further upside. And until benchmark 10-year Treasury yields show more signs of an enduring downward shift from recent highs, investors may hesitate to more aggressively re-engage.
For next-day market participants, Wednesday’s November private payrolls tally from ADP could fuel volatility. Ultimately US jobs data at week’s end along with any fresh inflation signals seem likely to dictate short-term direction.
Conclusion: Flat Open Can’t Derail Potentially Epic Monthly Climb
Even with a muted start to the week in early action Monday, optimism around peaking inflation and slowing Fed tightening has US stocks on pace for their best month since July 2021. With consumer health in focus, overarching trends into year-end will hinge on whether households continue powering growth or pull back more severely as higher rates reverberate across the economy.