Stock markets were a sea of green this past week, with all but one S&P 500 sectors closing the week higher. The S&P 500 (SPX) gained 1.68%, while the Dow Jones Industrial Average (DJIA) jumped by 1.96%, reaching a new record. Meanwhile, the tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) rose by 1.73% and 1.87%, respectively.
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Corporate earnings took center stage this week, with Nvidia’s (NVDA) report a defining moment of the earnings season. While analysts dubbed the report “near perfect,” investors were less persuaded as short-term outlook was not as strong as was expected. The negative investor reaction highlighted the weight of high expectations on technology stocks in general and the AI leader in particular.
Tech stocks, and specifically semiconductor large caps that have clocked in outsized gains in the past two years riding the AI train, now seem to be in a consolidation phase as investors weigh further prospects versus their often-hefty valuations. The market as a whole is trading at valuations far higher than the historical averages, which portends lower long-term gains going forward.
The good news for investors is that there are plenty of fairly-priced stocks within the large-cap universe, and there are even more options that are below the large market-cap threshold. The equal-weighted S&P 500, which assigns all index constituents the same weight, trades only a tad above its 10-year average multiple. Meanwhile, mid- and small-cap stocks are still below their long-term valuations.
The robust economic backdrop, coupled with the expected policy changes under Trump 2.0, supports optimistic outlook for stocks that until a couple of months ago were all but forgotten, overshadowed by some of their flashier peers. However, the tech behemoths such as the “Magnificent” pack, with their fortress balance sheets, enormous cash piles, and strong earnings growth, should not be dismissed, as the AI revolution has just begun.
Three Economic Events
Here are three economic events that could affect your portfolio this week. For a full listing of additional economic events, check out the TipRanks Economic Calendar.
» November’s Consumer Confidence Index – Tuesday, 11/26 – this report, released by the Conference Board, conveys the level of confidence that consumers have in economic activity. The level of confidence affects consumer spending, which contributes about 70% of the U.S. GDP, therefore this Index is one of the most important leading indicators.
» Q3 2024 GDP Growth Annualized (second estimate) – Wednesday, 11/27 – This report will provide an updated picture of the change in GDP. Economists project that the second estimate will confirm the 2.8% annualized rate of growth reflected in the advance estimate, a slight deceleration from Q2’s 3% growth.
» October’s Core Personal Consumption Expenditures (Core PCE) – Wednesday, 11/27 – This report reflects the average amount of money consumers spend monthly, excluding seasonally volatile products such as food and energy. FOMC policymakers use the annual Core PCE Price Index as their primary inflation gauge.
For more exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.
