Market Update: November 28, 2023
In a holiday-shortened week, economic data included the index of leading economic indicators continuing their slide downward over the past half-year. Durable goods orders also declined, as did existing home sales. On the positive side, jobless claims fell back.
Equities were slightly higher last week, on light volume in the U.S. and few dramatic data releases. Bonds were mixed as interest rates ticked slightly higher, but spirits were boosted by a decent auction for long-term U.S. Treasuries. Commodities were also mixed with gains in metals offset by a slight drop in oil prices.
U.S. stocks ended the light volume holiday week slightly higher, with minimal economic information to review. Every sector ended in the positive, led by health care and consumer staples, while energy lagged with minimal gains, following minimal change in petroleum prices. The closely-watched earnings news from Magnificent 7 member Nvidia resulted in a beat of earnings and revenue expectations, but a stock price decline related to forward-looking guidance related to China. Otherwise, the drama for the week included the conclusion of the OpenAI executive suite drama, following the firing of the CEO, his move to primary investor Microsoft, and then a return to the artificial intelligence firm by Thanksgiving after an employee revolt. The newsworthiness of this is less financial in the near-term, but remains tied to excitement about which firms become most dominant in AI and the battle over commercialization—much of which remains to be determined.
Foreign stocks gained last week, with continued hopes of central banks perhaps cutting rates in the first few quarters of 2024, with additional help in developed markets from a weaker dollar, while emerging market currencies experienced little impact on net. Emerging markets were boosted by hopes for additional Chinese stimulus measures, with the underlying story being whether the government will provide enough to satisfy markets. Stocks in frontier market Argentina shot up 25% on the week upon the election of a far-right libertarian as president, with market hopes that a shake-up will finally get the country back on track after years of financial challenges.
Bonds fell back slightly on the week, with interest rates ticking up minimally on the shortened trading week and lighter volume. Investment-grade corporates outperformed governments, as spreads tightened and issuance remained tight, and high yield outperformed all other groups. Domestic sentiment at least was boosted a bit by a successful auction of 20-year U.S. Treasury bonds earlier in the week. These auctions have been increasingly watched for signs of weakening demand for U.S debt relative to expected rising supply from higher deficits, but no catastrophe has unfolded yet. Foreign bonds outperformed U.S. thanks to a decline in the U.S. dollar.
Commodities were little changed during the light trading week, with slight gains in precious and industrial metals offset by mixed results in energy. Crude oil fell a fraction of a percent to $76/barrel for the week, with further declines in natural gas contracts.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.