Good morning investors,
Markets demonstrated meaningful breadth Monday as gains extended well beyond mega-cap leadership, with the S&P 500 Equal Weight Index surging nearly 0.9% despite mixed mega-cap performance. Small caps continue showing particular strength while Wall Street processes both President-elect Trump's Treasury Secretary nomination and potential trade policy implications.
Market Review
Yesterday's session highlighted expanding market participation as the Dow Jones Industrial Average advanced 440.06 points (0.99%) to 44,736.57, setting another record close. The S&P 500 gained 18.03 points (0.30%) to 5,987.37 despite pressure from Tesla and Nvidia, while the Nasdaq Composite added 51.18 points (0.27%) to 19,054.84. Notably, the Russell 2000 surged nearly 1.5% to fresh all-time highs, finally surpassing levels from three years ago.
Treasury yields retreated meaningfully with the 10-year falling 15 basis points to 4.27%, while market volatility moderated as VIX touched 14.74, its lowest level since November 14.
Policy Framework
Scott Bessent's Treasury Secretary nomination creates compelling market implications given his sophisticated macro background. However, Trump's pledge of significant tariffs on Canada, Mexico, and China introduces meaningful trade policy considerations requiring careful analysis. The distinction between Bessent's measured approach and potential trade friction warrants monitoring.
Corporate Evolution
Technology Development Intel's finalized $7.86 billion CHIPS Act funding, though reduced from initial $8.5 billion following separate Pentagon award, demonstrates meaningful domestic semiconductor momentum. The package supports nearly $90 billion in manufacturing projects across Arizona, New Mexico, Ohio, and Oregon.
Software Sector Zoom's raised guidance (FY25 revenue $4.65-4.66B vs prior $4.63-4.64B) and expanded share repurchase suggest sustained hybrid work demand. Enterprise revenue growth reaching 59% of total sales validates business model evolution beyond pandemic dynamics.
Retail Framework Best Buy's reduced annual outlook (comparable sales -2.5% to -3.5% vs prior -1.5% to -3.0%) creates cautious holiday implications. Similarly, Kohl's leadership transition amid continued guidance pressure suggests challenging discretionary environment.
Economic Framework
This holiday-shortened week brings crucial data potentially influencing December's FOMC decision. Markets currently price 53% probability of a 25bp cut at the December 17-18 meeting, though today's releases warrant careful attention:
S&P Case-Shiller Home Price Index (9:00 AM ET):
Expectations: +4.8% YoY vs prior +5.2%
Housing strength remains crucial Fed consideration
Consumer Confidence (10:00 AM ET):
Forecast: 111.0 vs 108.7 prior
Consumer resilience key to policy evolution
New Home Sales (10:00 AM ET):
Expected: 725,000 vs 738,000 prior
Projected 1.8% monthly decline
FOMC Minutes (2:00 PM ET):
Focus on inflation framework discussion
Committee's view on growth-inflation balance
Wednesday's core PCE reading (+0.3% MoM, +2.8% YoY expected) takes heightened significance as the Fed's preferred inflation gauge ahead of December's meeting.
Strategic Outlook
Current market structure requires sophisticated discrimination amid broadening participation. While mega-cap mixed performance creates selective pressure, small cap strength and falling volatility suggest improving sentiment. The combination of policy evolution, corporate adaptation, and technical momentum creates compelling framework development.
The distinction between near-term tariff implications and longer-term economic management grows increasingly important as markets process both Treasury leadership and trade policy. Careful attention to both opportunity and risk remains essential for long-term success.
As always, feel free to reach out with questions about positioning for these evolving market dynamics.
Dan Sheehan
This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.