Thursday Macro & Markets Update

The markets resumed their rally in thin pre-holiday trading on Wednesday, after a brief decline in the previous session. Investors brushed aside an increase in consumers’ 12-month inflation expectations from 4.4% to 4.5%, as these unwelcome results were overshadowed by positive news from other directions. Oil slumped, adding to market optimism going into the Thanksgiving break.

Amazon.com (AMZN) rallied in anticipation of robust Black Friday and Cyber Monday sales. Microsoft (MSFT) rose as OpenAI was reported to reinstate Sam Altman as a CEO. Tech stocks led the markets higher, overcoming a slump in NVIDIA (NVDA) shares. The chipmaker’s Q3 results by far topped estimates, but the downbeat outlook on its Chinese sales, accounting for a fifth of the total, spooked investors.

On the macroeconomic side of the news page, the reports on durable goods orders and weekly unemployment claims pointed to further weakening of the economy, suggesting that a “soft landing” is in sight. That, despite an unexpected jump in consumer sentiment, which the markets viewed as seasonal.

On Tuesday, the markets reacted negatively to the contents of the Minutes from the Federal Reserve’s last meeting, which were less dovish than investors expected. While all FOMC participants agreed that they should “proceed carefully,” many of them said that risks to inflation continue to be on the upside. The Minutes confirmed the Fed’s “higher for longer” message, but the recent batch of mostly soft economic data, published after the November 1 Fed meeting, adds some question marks regarding the length of the higher-rates period.

All in all, this week, as well as the month, is shaping out to be very positive for the markets in the absence of negative catalysts, which could break the market consensus that the Fed’s hiking cycle has ended. So far, the S&P 500 (SPX) has seen one of its best Novembers on record, adding to its strong gains year-to-date.