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What you need to know today
Sweet November
The Dow Jones Industrial Average rallied Thursday to a new high for the year, with soft inflation data and strong Salesforce earnings capping 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. The Nasdaq Composite, however, slipped 0.2% to 14,226.22 as investors booked profits in Big Tech stocks that have led the November comeback. The Dow snapped its three-month losing streak to end November 8.9% higher. The S&P 500 also rose 8.9% in November, while the Nasdaq advanced 10.7% — their best monthly performances since July 2022, and about 1% shy of their respective 2023 highs.
U.S. inflation watch
Inflation as measured by personal spending increased in line with expectations in October, possibly giving the Federal Reserve more incentive to hold rates steady and perhaps start cutting in 2024, according to data released Thursday. The personal consumption expenditures price index, excluding food and energy prices, rose 0.2% for the month and 3.5% on a year-over-year basis, the Commerce Department reported. Both numbers aligned with the Dow Jones consensus and were down from their respective readings of 0.3% and 3.7% in September. Headline inflation was flat on the month and at a 3% rate for the 12-month period, the release also showed. Energy prices fell 2.6% on the month, helping keep overall inflation in check, though food prices rose 0.2%.
No deeper OPEC+ cuts
The influential Organization of the Petroleum Exporting Countries and allies, collectively known as OPEC+, on Thursday opted against formally deepening production cuts, but de facto leader Saudi Arabia extended its 1 million barrel per day voluntary reduction into the first quarter, and other members announced more cuts. Meanwhile, Brazil is set to join OPEC+ from January.
Battle mode activated
Activist investor Nelson Peltz and his firm are seeking more than two seats on Disney's board, according to a person familiar with the matter, setting the stage for a proxy fight. Disney, for its part, suggested the proxy fight stemmed from a personal grudge held by one of Peltz's allies, former Marvel boss Ike Perlmutter. The news came the morning after Disney added Morgan Stanley CEO James Gorman and former Sky TV boss Jeremy Darroch to its board, a move widely seen as a bid to fend off a potential challenge from Peltz. Former Illumina CEO Francis deSouza will not seek reelection to the board.
Climate wins
Countries at the U.N. COP28 summit on Thursday agreed on deal details for a disaster fund to help nations reeling from damages caused by the climate crisis. This agreement, struck on the opening day of the conference in the United Arab Emirates, builds on a deal for a loss and damage fund brokered at COP27 in Egypt last year — widely seen as a historic breakthrough and potential turning point in the climate crisis.
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The bottom line
The U.S. economy is cooling.
The core personal consumption expenditures price index, excluding food and energy prices, rose 0.2% for the month and 3.5% on a year-over-year basis in October, in line with expectations and down from respective readings of 0.3% and 3.7% in September.
Personal income and spending both rose 0.2% in October, slower than in September. The latest continuing jobless claims were at their highest in about two years.
Pending home sales, a gauge for signed contracts on existing homes, dropped 1.5% in October from September to hit their lowest level since the National Association of Realtors began tracking this metric in 2001, meaning it's even worse than readings during the financial crisis more than a decade ago. Sales were down 8.5% from October of last year.
So, not surprisingly, investors are betting the Federal Reserve will cut rates soon — and fast. But, maybe they should be a little more careful in what they wish for.
After all, interest rate cuts don't quite happen during good times. If the Fed meets market expectations and starts cutting aggressively in 2024, it will likely be against a backdrop of a sharply slowing economy and rising unemployment.
But a slowing economy does not mean it will end up falling off a cliff into a recession. The Fed may still decide to ease policy, but not as aggressively.
It might be profitable betting on extremities and playing the volatility game, but one has to factor in the chances of getting burnt in the process.
— CNBC's Jeff Cox contributed to this report.
