Market Monitor December 12

Highlights

The rise in producer prices disrupted the U.S. markets, which ended November up 0.4% month-over-month, double the expected 0.2%.

This significant increase raises doubts about the Federal Reserve's upcoming interest rate cut.

Company News:

• Adobe closed 13% lower due to disappointing revenue and profit forecasts for 2025. Analysts are particularly skeptical about Adobe's ability to fend off rivals like OpenAI in the generative AI space. For now, such tools at Adobe remain in testing. The company’s rating was downgraded due to slowing growth and poor outlook.

• Warner Bros. Discovery was the big winner, surging 15% after announcing plans to spin off its traditional TV operations from its streaming and studio businesses.

• Nordson, an industrial adhesives manufacturer, dropped more than 8%, despite exceeding revenue and profit expectations for the fourth quarter. The decline is attributed to disappointing 2025 guidance, following news of a weaker order backlog and more cautious customer purchasing behavior. On a positive note, the acquisition of Atrion, a supplier of medical components, was well-received.

Major ETFs Performance (SPY, QQQ, IWM)

SPY (S&P 500 ETF)

• Current Price: 604.33, down -0.52% on the day.
• Short-Term Trend: Positive, with a gain of +1.2% in the past month.
• Long-Term Trend: Strongly bullish, with a 12-month increase of +28.76%.

Recent price movement indicates a continuation of an uptrend, supported by higher lows. Volume remains consistent.

QQQ (Invesco QQQ ETF)

• Current Price: 526.5, down -0.65% on the day.
• Short-Term Trend: Positive, with a notable +2.78% gain over the last month.
• Long-Term Trend: Extremely bullish, with a 12-month gain of +29.89%.

Tech-heavy QQQ is exhibiting strong momentum. A recent breakout above resistance levels aligns with its superior relative strength.

IWM (Russell 2000 ETF)

• Current Price: 234.68, down -1.3% on the day.
• Short-Term Trend: Negative, with losses over the past week and month (-1.43% and -0.18% respectively).
• Long-Term Trend: Positive, with an 8.23% increase over the past 3 months and a 12-month gain of 19.1%.

IWM has shown underperformance compared to SPY and QQQ in the short term, indicating weaker small-cap activity. However, its long-term outlook remains constructive.

Sector Performance

1-Week Performance

Best Performers:

• Information Technology: +3% growth, showcasing continued strength in the tech sector.

Worst Performers:

• Energy: -2% decline, reflecting a pullback in oil and gas-related equities.
• Utilities: Decline close to -2%, suggesting risk-off sentiment.

1-Month Performance

Leaders:

• Information Technology: A strong rally of +10%.
• Communication Services and Consumer Discretionary: Significant gains, reflecting a focus on growth sectors.

Laggards:

• Real Estate, Healthcare and Energy: These sectors struggled over the past month, underperforming due to commodity price volatility.

3-Month Performance

Key Standouts:

• Information Technology: Exceptional performance with gains exceeding +30%.
• Consumer Discretionary and Industrials: Both sectors have performed well, highlighting strong demand.

Weakest Sector:

• Real Estate: Persistent underperformance due to higher borrowing costs.

All info available on our Sector Performance page

Historical Breadth Numbers

The historical breadth data provides insights into market participation and sentiment:

Advancers vs. Decliners:

• Advancers: 22% of stocks advanced, indicating a broad-based pullback.
• Decliners: 75.8% of stocks declined, with 4.6% declining over 4%.

Moving Averages:

• Stocks above SMA(20): 47%, suggesting short-term weakness.
• Stocks above SMA(200): 60.1%, which still indicates a bullish longer-term bias.

New Highs/Lows:

• New highs: 2.2%, showing limited upside momentum.
• New lows: 2.3%, signaling a balance between highs and lows.

Trends over the Week

• The percentage of stocks above their moving averages (SMA 50/100/200) has been gradually declining, reflecting short-term deterioration in breadth.

Advanced/Declined Day Metrics:

• Decliners have dominated, with over 70% of stocks declining consistently over the week.

All info available on our Market Monitor page

Outlook

The relatively high percentage of stocks above their 200-day moving averages (60.1%) indicates a bullish long-term bias. However, the weakening short-term breadth points to possible consolidation or a mild pullback in the near term.

Conclusion

Overall Market Sentiment:

• The market remains in a long-term uptrend, led by strong performance in growth and technology-related sectors (as highlighted by QQQ and IT sector strength). However, the short-term pullback, as seen in declining breadth metrics and sector underperformance (e.g., energy and utilities), suggests caution.

Opportunities:

• Tech Sector: Continues to outperform; high-growth tech names remain appealing.
• Communication Services & Consumer Discretionary: These are also showing solid short-term momentum.

Risks:

• Small Caps (IWM): Struggling to maintain momentum, reflecting a broader market divergence.
• Real Estate and Energy: Lagging sectors could face further challenges, especially if interest rates remain elevated or growth slows.

This analysis indicates that while the long-term trends remain robust, near-term risks could create a mixed environment for traders and investors.