The Dow Jones Industrial Average rallied Thursday to a new high for the year, as more cooling inflation data and strong Salesforce earnings capped the benchmark's best month since October 2022.
The 30-stock Dow gained 520 points, or 1.47%, to close at 35,950.89, surpassing its previous high for the year in August. The S&P 500 added 0.4% to 4,567.80. However, the Nasdaq Composite was about 0.2% lower at 14,226.22 as investors took some profits in Big Tech stocks that have led the November comeback.
The Dow closed out November with an 8.9% gain, breaking its three-month losing streak. The S&P 500 rose 8.9% in November, while the Nasdaq advanced 10.7%. Both averages had their best monthly performance since July 2022, and were trading about 1% away from their respective 2023 highs.
"A lot of what we've seen in November is just a realization that the economy is still doing well, that consumers are resilient and the Fed is on hold, more than anything else," said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. "Assuming those conditions stay between now and the end of the year — which is our our most likely scenario — we think the market will continue to drift higher."
"For 2022, we spent so much time thinking about what could go wrong, and we really didn't spend any time thinking about what could go right. 2023 is a story of a lot of things going right, " Zaccarelli added.
Leading the Dow higher on Thursday was cloud software company Salesforce, which popped 9.4% on the back of better-than-expected earnings and revenue for the fiscal third quarter. Salesforce's cloud data business, which saw its revenue increase by 22% from the previous year, and its artificial intelligence product Einstein GPT were behind the positive report. Health-care companies UnitedHealth Group, Johnson & Johnson, Merck and Amgen also led the index higher.
Data released early Thursday showed that the personal consumption expenditures price index — the Federal Reserve's favorite inflation gauge — rose 3.5% on a year-over-year basis, a slowing from a 3.7% annual gain in prior month.
These numbers were the latest in a string of positive inflation data seen in November that caused traders to conclude the Federal Reserve is likely done raising rates and could even begin lowering them in 2024.
"What's driving the market, ultimately, is that shift in monetary policy," said Sonu Varghese, global macro strategist at Carson Group. "Lower volatility could also push more money into markets as people regrow their portfolios and increase exposure to equities. We think new highs are definitely possible."
The 10-year Treasury yield, which had spooked investors by rising above 5% last month, collapsed this month as the cooling inflation data rolled out, helping to boost sentiment for equities. The 10-year yield ticked a higher to 4.34% Thursday.
Technology shares were far and away the big winners in November, but investors took some of those bets off the table as the month came to a close. Nvidia shed 2.9% on Thursday, but still ended the month up 14.7%. Tesla shares were off by 1.7% Thursday following a 19.5% comeback in November. Alphabet and Meta lost 1.8% and 1.5% during the day, respectively.
Stocks end Thursday mixed
BTIG technical analyst notes November breakouts in smallcaps, REITs and regional banks
Smallcap stocks, real estate investment trusts and regional banks have scored breakout months in November, according to BTIG technical analyst Jonathan Krinsky.
The SPDR S&P Regional Banking ETF has soared 14.2% in November, the Vanguard Real Estate ETF has jumped 11.2% and iShares Russell 2000 ETF that tracks smallcap stocks is up 9.2%. Meanwhile, the S&P 500 Information Technology Index is up 12% in November and the S&P 500 by 8%.
"REITs continue to impress and are also now firmly above their 200 DMA," Krinsky wrote to clients Thursday, referring to the 200-day moving average price. "Regional Banks might now be one of the best charts in the market, having consolidated for two weeks along the 200 DMA, with a breakout [Wednesday] and upside confirmation today."
— Scott Schnipper, Michael Bloom
Market pricing points to five rate cuts following inflation data
As markets got another signal Thursday that inflation is ebbing, they solidified bets that the Fed is done hiking rates and will be cutting substantially in 2024.
Futures pricing suggested only a minimal chance of rate increases at the Federal Open Market Committee's December and January meetings, according to CME Group data. Moreover, futures pointed to a better-than-even chance that the central bank will cut benchmark rates five times next year, the equivalent of 1.25 percentage points.
The moves followed Thursday morning economic readings showing that core PCE inflation fell to 3.5% and continuing jobless claims rose to a two-year high.
Long-term bond ETF outperforms in November
The SPDR S&P 500 ETF Trust may be having one of its best months ever, but long-term bonds are seeing even greater gains.
Bond yields move inversely to prices.
— Michelle Fox
Top 3 Nasdaq gainers this month are all technology stocks
The Nasdaq 100 has gained nearly 11% so far in this month. The gains in the index have been boosted by three stocks that have each rallied over 30% in November, and hit new 52-week highs on Thursday.
PDD Holdings, the largest gainer in the Nasdaq, has soared 43% so far this month. The Chinese e-commerce giant owns retailers such as Temu, which has dominated overseas markets since its launch in September 2022. Following its third-quarter earnings and revenue beat, Morgan Stanley named the stock a top pick and hiked its price target to $170.
Software firm Datadog has also gained more than 43% this month after the company reported stronger-than-expected third-quarter earnings and full-year guidance. TD Cowen named the company one of its best ideas for 2024.
Shares of cybersecurity technology firm CrowdStrike