12/16-12/20/24 Weekly Market Recap - Movers, Macro, Monetary, and Fiscal


Week 12/16-12/20/24

Weekly Market Summary by Aremorph


Summary - Movers, Macro, Monetary, and Fiscal


This week, the impactful FOMC meeting and subsequent conference injected fear into the market, influencing yet another red week in the broader stock market. Beyond the interest rate, the week harbored geopolitical events in Europe.

Global Weekly Movements

U.S. Equities

  • S&P 500 Index: 5,930.85 (-2.19%)

    • All sectors of the SPX were negative this week, with Real Estate (XLRE) and Energy (XLE) leading the bear rush. At (-6.68%) and (-5.69%) respectively reflected bearish sentiment following the FOMC meeting. Real estate in particular has a high interest rate sensitivity, and with slower rate reductions impacting borrowing costs, valuation and demand of real estate assets could be impacted. 

  • Dow Jones Industrial Average: 42,840.26 (-2.25%)

  • Russell 3000 Index: 3,386.8 (-2.48%)

  • NASDAQ Composite: 19,572.60 (-2.22%)

  • Big Movers of the Week

    • Nissan (NSANY): 5.68 (20.85%)

      • Honda and Nissa have publicised negotiations regarding a merger resulting in a 40 year record breaking surge in their stock price. The merger aims to solidify Honda-Nissan and potentially Mitsubishi as the third largest auto group behind Toyota and Volkswagen.

    • Lucid (LCID): 3.02 (16.60%)

      • A Cox Automotive report showed a 13.6% growth in EV sales during November, the second strongest month in 2024. This market optimism for EVs impacted Lucid by lifting its stock. Lucid also attempts to shift the demand for $17,500 credits for leases on premium vehicles that do not qualify for federal tax credits. 

    • Palantir (PLTR): 80.55 (7.06%)

      • With the news of Palatir joining the Nasdaq 100 index on Dec.23, the stock rallied. Moreover, partnership with enterprise clients like Airbus and Merck alongside hefty government contracts help push the stock to superstardom.

    • Tesla (TSLA): 421.06 (-4.48%)

      • Tesla recalled around 700,000 electric vehicles due to faulty tire pressure monitoring software malfunctioning. Despite a down week, Tesla remains 72% up since the election, given Musk’s close connection with presidential elect Trump.

    • Meta (META): 585.25 (-7.14%)

      • With a violent 5% drop in stock price after the FOMC meeting and briefing with Jerome Powell indicating a more hawkish federal reserve and hesitant views of future rate cuts.

    • Starbucks (SBUX): 87.97 (-9.19%)

      • Strikes from workers in large cosmopolitan cities like LA, Chicago, and Seattle spark worries for investors despite the sentiment boost after the election of Brian Niccol to CEO. 

Chinese Equities - Shanghai Composite (SHCOMP): 3,368.07 (-0.65%)

Hong Kong Equities - Hang Seng Index (HSI): 19,720.70 (-1.14%)

Japanese Equities- Nikkei 2225 (NI225): 38,701.90 (-2.15%)

European Equities

  • UK Index (UKX): 8,084.61 (-2.6%)

  • German Index (DAX): 19,884.75 (-2.34%)

Commodities

  • Gold Futures: 2,640.5 (-1.12%)

  • Crude Oil Futures: 69.58 (-1.23%)

U.S. Monetary & Fiscal Policy:

FOMC Meeting + Chair Powell: On December 18, 2024, the Federal Reserve announced a 25 basis point rate cut, marking its third reduction this year. Despite this move, the Fed signaled a slower pace of rate cuts for 2025 due to ongoing inflation concerns. Officials now project two rate cuts next year, down from four previously expected. Inflation remains above the Fed's 2% target, with core inflation at 2.8% in October. The Fed's cautious approach reflects the economy's resilience, with strong growth and low unemployment, but rising inflation and policy uncertainties, particularly around President-elect Donald Trump's proposed fiscal and trade policies, complicate the outlook.


US Government Shutdown: The US government was facing shutdown as congressional approval of a spending bill failed to pass by its deadline of midnight Dec 20th. Extension of funding until March was proposed but failed to gain support by Elon Musk and Presidential Elect Trump. If the shutdown were to occur, essential service would continue, but others such as food assistance, preschool, and student loans would close. Moreover, many workers would be negatively impacted, working on no pay or forced leave. Just before midnight on Friday, the House voted 366 vs 34 to extend the bill, passing the legislation into the Senate, and is expected to be signed by Biden soon. 

Global Macroeconomic News:

U.S. Retail Sales: November 2024 retailed sales rose by 0.7%, exceeding expectations and reflecting robust economic momentum. Key drivers included higher purchases of motor vehicles and online goods, signaling strong consumer demand. Despite strong retail sales, the Federal Reserve is still expected to reduce interest rates, though concerns about tariffs and immigration policies could impact future economic growth. While the broader economy remains resilient, there are signs of slowing growth, particularly in manufacturing, due to factors like the effects of the Fed's tightening policies and labor disruptions.


GDP Q3: In theQ3 of 2024, the U.S. economy grew at an annualized rate of 3.1%, slightly revised up from the prior estimate of 2.8%. This growth was driven by strong consumer spending, exports, nonresidential investment, and federal government spending, though residential investment and private inventory investment declined. The GDP increase was reflected in a 5% rise in current-dollar GDP, reaching $29.37 trillion. Personal income grew by $191.7 billion, with a 2.7% increase in disposable personal income. Inflation remained moderate, with the PCE price index increasing 1.5%, while core inflation (excluding food and energy) rose 2.2%.


PCE Index: PCE, the Federal Reserve's preferred inflation gauge, showed a 2.4% annual inflation rate for November, slightly lower than the expected 2.5%. The monthly increase was just 0.1%, with core PCE (excluding food and energy) also rising by 0.1% month-over-month, marking a 2.8% increase year-over-year. Personal income grew by 0.3%, and personal spending increased by 0.4%, both of which were below expectations. Despite the slight cooling in inflation, the Fed’s recent rate decisions and projections indicate ongoing concerns about inflation trends.


Leading Economic Indicator: The US Leading Economic Index (LEI) rose by 0.3% in November, marking its first increase since early 2022 and signaling a potential stabilization in economic activity. Key drivers included stronger building permits, improved stock prices, and fewer unemployment claims. With this uptick, recession risks appear to have eased, and the Conference Board projects US GDP growth of 2.7% in 2024. However, slower growth of 2.0% is expected in 2025


Assasiantion of Russian General: Ukrainian intelligence (SBU) has claimed responsibility for the assassination of Russian Lieutenant General Igor Kirillov, the chief of Russia's Nuclear, Biological, and Chemical Protection Troops. Kirillov, who was accused of overseeing the use of chemical weapons against Ukrainian forces, was killed in a bomb attack involving an electric scooter in Moscow on December 17th. This marks a significant escalation in Ukraine's targeted strikes on Russian military officials. The Russian government has vowed revenge, with senior figures labeling the assassination as an act of terrorism.

Potentially Impacted Securities: Gold, Crude


Volkswagen Strikes: Volkswagen has reached a deal with its IG Metall union to keep all 10 of its plants in Germany open, securing jobs for its workers until 2030. Despite this, the company plans to cut 35,000 jobs over the next five years through voluntary measures such as early retirement packages, as part of cost-reduction efforts. Volkswagen had previously considered closing factories and laying off workers due to declining demand for its products, including EVs, but the new agreement with the union means no immediate closures or redundancies

Potentially Impacted Securities: VWAGY

Sources: Google Finance, Market Watch, CME Fedwatch, Yahoo Finance, Reuters, New York Times, Bloomberg, Wall St Journal

Have a great week investing!

Sincerely,
Aremorph

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