S&P 500 Rises to New High as Outlook for 2025 Rate Cuts Improves

Wall Street’s bulls had an especially good Thanksgiving week. In addition to having a holiday-shortened work week, they were especially thankful to have the prospect of an additional rate cut in 2025 put back on the table. In response to that good news, the S&P 500 (Index: SPX) rose to close at a new all-time record high of 6,032.38 at the close of trading on Friday, 29 November 2024. The index ended the week up just over one percent over where it closed the preceding week.

There was no specific news headline that drove stock prices during the short trading week. Instead, a favorable consensus developed during the week of how the Fed’s current series of rate hikes would extend into 2025. The CME Group’s FedWatch Tool projects the Fed will act to reduce the Federal Funds Rate by 0.25% on 18 December 2024. After that, the FedWatch tool now anticipates that the Fed’s next interest rate action will be another quarter point cut on 19 March (2025-Q1), some three months earlier than projected a week earlier. The tool has added a new expected rate change in its forecast for 2025, a 0.25% cut on 17 September (2025-Q3), which wasn’t previously in the forecast.

Those changes were enough to continue the upward momentum of the S&P 500. The latest update of the alternative futures chart places the index at a level that’s consistent with investors focusing on the distant future quarter of 2025-Q3, which is consistent with the FedWatch Tool’s projections as of Friday, 29 November 2024.

With U.S. markets trading week shortened by the Thanksgiving holiday, much of the market moving news of the week that was came from outside the U.S.

Monday, 25 November 2024

• Signs and portents for the U.S. economy:

• Oil prices steady as Russia, Iran tensions fuel supply fears
• Exclusive: Trump prepares wide-ranging energy plan to boost gas exports, oil drilling, sources say

Fed minions get data saying they have more problems than inflation to address, think productivity might be bright spot:

• Fed survey finds inflation fading as a risk next to debt, trade wars
• Fed’s top expert on productivity sees case for optimism

ECB minions say Germany in bad shape, but will take their time in delivering rate cuts to stimulate Eurozone economy:

• Germany stuck in economic weakness but rate cuts should be gradual, Nagel says

Wall St closes higher; small-caps hit record high after Trump nominates Bessent

Tuesday, 26 November 2024

• Signs and portents for the U.S. economy:

• Oil rises after selloff on possible Middle East ceasefire

• US oil firms unlikely to go ‘drill, baby, drill’ under Trump, says Exxon executive

US new home sales tumble to two-year low in October

• US monthly house prices rise strongly in September

Trump tariffs would harm all involved, US trade partners say

Fed minions signal rate cut still coming in December 2024, want to go slower on future rate cuts:

• Fed’s Kashkari: Interest-rate cut in December is ‘reasonable’
• Fed cites volatility, uncertainty as reasons to go slow on rate cuts

• Some Fed policymakers open to lowering the overnight repo rate

Bigger trouble developing in China:

• China Oct industrial profits narrow decline, but headwinds loom
• China state media warn Trump against mutually destructive tariff war

BOJ minions getting inflation data to justify rate hike:

• Japan’s steady service inflation keeps alive BOJ rate-hike prospects

Bigger trouble developing in Eurozone, ECB minions get support for more rate cuts from inflation, growth data:

• Euro’s bruising leaves global investors on edge
• Investors’ euro zone inflation expectations fall below 2% for first time since 2022
• ECB policymakers grow nervous about weak growth, Trump tariffs

S&P 500, Dow finish at record highs as investors set aside Trump tariff plans

• Wall Street stocks end higher on tech; markets analyze Trump’s tariff threats, Fed minutes

Wednesday, 27 November 2024

• Signs and portents for the U.S. economy:

• Oil steady after surprise rise in US gasoline stocks
• US PCE price inflation ticks higher in October, as expected
• US third-quarter economic growth unrevised at 2.8%
• U.S. housing affordability to worsen even as price rises slow: Reuters poll

BOJ minions losing money:

• BOJ incurs record losses on bond holdings as yields rise

ECB minions worried that Eurozone has structural economic problem:

• ECB rate stimulus no magic wand for structural faults, Schnabel argues
• French risk premium hits 12-year high while German bond yields fall

Nasdaq falls, S&P ends off high with tech stocks under pressure, PCE inflation stalling

• Wall Street stocks end lower after inflation data, tech stocks push Nasdaq down

Friday, 29 November 2024

• Signs and portents for the U.S. economy:

• Oil settles down as ease of supply risks drives weekly loss

Bigger trouble, bigger rate cuts developing in Canada:

• Canada’s economy expands by just 1%, chances of big rate cut jump
• Prepare for extra traffic at US ports

• Looming Trump Tariffs Spark Wave of Freight Frontloading From China
• China Air Cargo Flights Soar as Trump Return, Tariffs Loom

Mixed economic signs developing in China:

• China’s home prices set to stabilise by 2026 after slower falls: Reuters poll
• China’s Nov manufacturing activity seen expanding for second month: Reuters poll

But bigger trouble still developing in China:

• Chinese bond market grapples with ‘Japanification’

BOJ minions counting on wage inflation to justify rate hike:

• BOJ’s Ueda says wage trends key to possible rate hikes, Nikkei reports

• BOJ’s Ueda says rate hike timing ‘approaching’, Nikkei reports

BOJ’s retreat from low rates heightens Japan’s debt troubles

ECB minions starting to think they might need to deliver a bigger Eurosone interest rate cut in December 2024:

• European companies cut jobs as economy sputters

• German retail sales fall more than expected in October

ECB needs to separate policy, transmission tools, Knot says

• Budget woes put French borrowing costs equal with crisis-scarred Greece
• Explainer: Could the ECB help France if borrowing costs surge further?

ECB’s Villeroy: Should keep door open of larger rate cut in December

S&P closed above 6,000 as the holiday shortened week ended; Nasdaq and Dow also gained

• S&P 500, Dow close at record highs on tech, retail in focus

The Atlanta Fed’s GDPNow tool‘s projection of the real GDP growth rate for the current quarter of 2024-Q3 increased to +2.7% from the previous week’s +2.5%.

Image credit: Microsoft Copilot Designer. Prompt: “An editorial cartoon with a Wall Street bull eating a Thanksgiving dinner with a dish labeled ‘EXTRA 2025 RATE CUT’”. The image was tweaked to add and clean up some text.