Market Monitor December 02

Highlights

Did Wall Street kick off a genuine year-end rally yesterday?

The tech-heavy Nasdaq already reached a new record high. Tesla gained 3.5%, benefiting from an optimistic price target by analyst Stephen Gengaro. The company is praised for its innovative value and market position, which surpasses the combined value of the 10 largest automakers.

Chip stocks also performed well, driven by milder US restrictions on chip technology exports to China. Companies like Lam Research (+6.3%), Arm (+4.5%), and AMD (+3.6%) posted strong gains. Intel drew attention due to the unexpected retirement of CEO Pat Gelsinger.

While the stock initially rose, it ultimately closed 0.5% lower. Intel is grappling with structural challenges, including market share losses and missed opportunities in AI chips. The stock has lost over 50% of its value this year.

The Dow Jones lost some ground, closing 0.2% lower. Notable decliners included JPMorgan (-1.4%), Amgen (-1.7%), and Honeywell International (-1.3%).

Market Performance Overview

SPY (S&P 500):

• Up 0.18% on the day.
• Short-Term Trend: Positive with 1.35% gains over the week and 11.71% gains over three months.
• Long-Term Trend: Robust with a 31.17% gain over the last 12 months.

QQQ (Nasdaq 100 ETF):

• Advanced 1.1% on the day.
• Short-Term Trend: Leading performance with 1.88% gains over the week and 14.84% gains over three months.
• Long-Term Trend: Strong growth of 31.39% over 12 months.

IWM (Russell 2000 ETF):

• Slight decline by -0.05% on the day, reflecting minor underperformance among smaller-cap stocks.
• Short-Term Trend: Positive with 1.25% gains over the week and 16.28% gains over three months.
• Long-Term Trend: Solid with a 29.42% gain over the last year.

Sector Performance

1-Week Performance

Leaders: Information Technology (+6%) and Health Care led the market, showing robust growth.

Laggard: Energy was the weakest sector, posting a significant decline.

1-Month Performance

Leaders: Information Technology and Industrials showed substantial gains, reflecting strong investor confidence in growth sectors.

Laggards: Real Estate and Consumer Staples delivered modest or minimal performance, highlighting weak interest in defensive sectors.

3-Month Performance

Leaders: Information Technology dominates with +30%, clearly driving much of the market’s gains. Industrials and Consumer Discretionary follow with impressive growth, signaling continued confidence in growth and economically sensitive sectors.

Laggards: Real Estate and Consumer Staples have underperformed significantly over this period, with minimal gains compared to growth sectors.

Sector Summary

• Over both the 1-week and 1-month periods, Information Technology and Industrials are the top-performing sectors, showing significant gains. This suggests a shift toward growth-oriented and cyclical sectors, which often thrive in an environment of economic optimism or improving market sentiment.

• Defensive sectors like Consumer Staples, Utilities, and Real Estate are underperforming, with minimal gains. This indicates reduced investor interest in safe-haven sectors, which are typically favored during periods of uncertainty or market weakness.

• Energy stands out as a laggard over the past week, with negative performance. This suggests that capital may be moving away from the sector, possibly due to weaker oil prices, changing demand dynamics, or less focus on inflation-sensitive assets.

• Be aware that these observations are based primarily on the 1-week and 1-month performance, so while they indicate a potential shift, it's still too early to confirm a sustained sector rotation.

All info available on our Sector Performance page

Historical Breadth Numbers

Market Breadth Metrics:

• Advancing Stocks: 46.7% (advancing for the day), while 50.8% advanced over the last 4 days.
• Declining Stocks: 53.3% on the day, but the 20-day SMA shows 72.1% of stocks trading above their average.
• Key indicators suggest broad market strength, with NH/NL ratio at 7.2/1.2, indicating more new highs than lows.
• Weekly Trend: Advancing stocks remain dominant over the past week with continued bullish momentum reflected in the advancing-declining ratios.

All info available on our Market Monitor page

Key Takeaways for Investors

1. The Nasdaq 100 (QQQ) continues to lead, driven by strong technology-sector performance.
2. Broad market breadth indicates bullish momentum, particularly with a significant portion of stocks trading above their 20-day and 50-day moving averages.
3. Sector rotation favors growth-oriented sectors like Information Technology and Industrials, while defensive sectors such as Consumer Staples underperform.
4. While the Russell 2000 (IWM) shows relative underperformance on the day, its medium- to long-term trends remain positive, reflecting strength in small-cap stocks.