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Stocks Gain Again
The major U.S. stock indexes recorded their fifth positive week in a row, although the upward momentum slowed a bit in a mostly quiet week of trading. The Dow added more than 2% and the S&P posted a fractional gain, with both indexes climbing to year-to-date highs.
November was the strongest month so far this year for the major U.S. stock indexes, and the big gains offset much of the overall decline from the previous three months’ negative results. The NASDAQ added 10.7%, the S&P 500 rose 8.9%, and the Dow gained 8.8%.
Prices of U.S. government bonds surged, sending yields lower, as investors appeared to focus on the prospect of potential interest-rate cuts in coming months rather than any further rate hikes. The yield of the 10-year U.S. Treasury bond fell on Friday to around 4.22%—the lowest in more than three months and down sharply from a recent peak of 4.99% on October 18.
The government’s initial estimate of third-quarter GDP growth beat expectations, and an updated figure released on Wednesday showed even stronger growth. The adjustment puts the annual growth rate at 5.2% versus the 4.9% initial estimate made in October. While that marks a sharp acceleration from the 2.1% growth in this year’s second quarter, a cooldown is expected in the current quarter, in part due to elevated interest rates.
Companies in the S&P 500 posted an average earnings gain of 4.7% over the same quarter a year earlier, according to FactSet data from the recently concluded earnings season. That result marked the first year-over-year earnings increase since 2022's third quarter. Communication services was the strongest sector with earnings growth of 42.0%.
The U.S. Federal Reserve’s preferred gauge for tracking inflation showed that consumer prices continued to rise at a slower pace in October. The Personal Consumption Expenditures Price Index rose at a 3.0% annual rate, down from 3.4% in September. Excluding volatile food and energy prices, core inflation climbed 3.5% in October versus 3.7% in September.
The government reported on Thursday that spending by U.S. consumers rose in October at an annual rate of 0.2%, the slowest pace in five months. The latest monthly result also marks a sharp slowdown from September’s 0.7% figure.
A monthly labor market report due out on Friday will show whether a recent slowdown in U.S. jobs growth extended into November. In October, the economy generated 150,000 new jobs—about half as many as in September and down from an average of 258,000 over the last 12 months. October’s unemployment rate edged upward to 3.9%.
Source: John Hancock Investment Management
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