Overview
On Wednesday, November 27, 2024, Wall Street stocks ended lower, with the Nasdaq Composite leading the declines, as technology stocks stumbled ahead of the Thanksgiving holiday. The Nasdaq fell 0.59%, while the S&P 500 lost 0.38%, and the Dow Jones Industrial Average dropped 0.31%.
The day’s market sentiment was heavily influenced by strong U.S. inflation data, which showed that consumer spending had increased solidly in October, indicating that the U.S. economy is still growing at a healthy pace. However, inflation progress appeared to have stalled, with inflation remaining stubbornly high. This sparked concerns that the Federal Reserve might be cautious about future rate cuts. The Fed’s meeting minutes released earlier this week revealed policymakers’ uncertainty about how much current rates were restricting economic growth, and whether it was appropriate to continue with rate cuts.
Investors were also assessing President-elect Donald Trump’s tariff pledge, which included the imposition of 25% duties on imports from Mexico and Canada and 10% on Chinese goods, unless certain border control and fentanyl flow issues were addressed. The impact of these potential tariffs raised further inflation concerns, potentially complicating the Fed’s path toward its 2% inflation target.
Among the hardest hit were Dell and HP, both of which saw their stock prices drop significantly following weak quarterly forecasts. As a result, the Information Technology sector declined by 1.2%. Semiconductor stocks like Nvidia and Microsoft also saw losses, contributing to the Philadelphia Semiconductor Index closing 1.8% lower.
Despite the broader market decline, small-cap stocks represented by the Russell 2000 index eked out a 0.1% gain, following a record high earlier in the week.
- Dow Jones Industrial Average: Fell 0.31% to 44,723.23
- S&P 500: Lost 0.38% to 5,998.78
- Nasdaq Composite: Dropped 0.59% to 19,061.78
Fear & Greed Index
Fear – Mixed sentiment driven by inflation concerns, tariff risks, and caution from the Fed, despite continued optimism for economic growth under Trump’s policies.
Sector Performance
- Winners:
- Energy: Benefited from higher oil prices amid geopolitical concerns, posting modest gains.
- Healthcare: Saw some strength with defensive names holding up well despite broader market declines.
- Losers:
- Technology: The Information Technology sector lost 1.2%, weighed down by poor earnings reports from Dell and HP.
- Consumer Discretionary: Stocks like Workday and others in the consumer-facing space were affected by weaker-than-expected demand.
Key Movers
- Dell (DELL): Slumped 12% on downbeat earnings forecasts, weighing on the IT sector.
- HP (HPQ): Dropped nearly 6% following a disappointing earnings outlook.
- Workday (WDAY): Fell 6.2% after forecasting lower-than-expected revenue growth due to weaker spending on its software.
Economic Data
- Inflation and Consumer Spending: U.S. consumer spending grew solidly in October, but inflation remained sticky, heightening concerns about the Fed’s ability to meet its 2% target.
- Jobless Claims: Continued to fall, signaling a robust labor market that may contribute to further Fed rate cut speculation.
Outlook
The market remains cautious as investors await more signals from the Federal Reserve about the pace of future rate cuts. With inflation stubbornly high and trade policy uncertainties under Trump’s administration, the Fed may hesitate to enact additional rate cuts. While the economy continues to grow at a solid pace, the risks of inflationary pressures and tariff-related uncertainties remain key themes for market participants.
In the short term, technology stocks may continue to face volatility, especially with weaker earnings outlooks from key players like Dell and HP. Small-cap stocks may outperform, but broader market sentiment will depend on economic data in the coming weeks, particularly in regard to inflation and consumer spending trends. As the holiday season approaches, attention will also turn to retail sales data and whether consumer demand remains strong enough to sustain economic momentum through year-end.