Topline
A major stock index hit its highest level of the year Thursday and the stock market is about to cap a historically strong month thanks to a growing conviction on Wall Street that interest rate hikes won’t weigh on stocks as significantly as initially feared.
November has been a banner month for the stock market.
Key Facts
Stocks gained modestly by mid-morning—the Dow Jones Industrial Average climbed 300 points, or 0.9%, while the S&P 500 was flat and tech-heavy Nasdaq declined 0.6%—following the release of another economic report, this time the personal consumption expenditures inflation gauge, supporting the notion the Federal Reserve will loosen monetary policy toward a more growth-friendly position.
The Dow hit its highest intraday level since February 22 on Thursday, riding a 6% post-earnings surge from software firm Salesforce.
The Dow (up 8% this month), S&P (up 9%) and Nasdaq (up 10%) have each posted historically strong November returns.
If the current gains hold, this will be the Dow’s best month since October 2022, the S&P’s best since July 2022 and the Nasdaq’s best since January, according to FactSet data.
It’s the S&P’s fourth-best month of the last decade and it’s second-best November of the last 40 years.
Big Number
87%. That’s the percentage of stocks listed on the S&P that have gained this November, as the breadth of the rally extended far past the “Magnificent Seven” big tech stocks which powered much of the early 2023 rally.
Surprising Fact
November’s rally also extended to smaller stocks largely left behind during this year’s rally, as the Russell 2000, which tracks 2,000 stocks with an average market capitalization of $2.7 billion, gained 9% this month. The small-cap index’s 3% year-to-date return significantly trails the Dow’s 8% gain, S&P’s 19% jump and Nasdaq’s 36% surge.
Key Background
Coming off of their worst year since 2008, stocks have warded off a variety of potential concerns, such as the highest interest rates in two decades and an earnings recession, while marching toward above-trend 2023 gains. Driving much of November’s gains was increased optimism that the Fed may cut interest rates sooner than previously anticipated as inflation data came in below expectations. With the shift in rate expectations, yields for 10-year U.S. bonds dipped more than 50 basis points to 4.3%, hitting its lowest level since September. The consensus among Wall Street strategists is that stocks will continue to gain in 2024, albeit below this year’s growth.
