US stock markets are on a high, with investors feeling optimistic about a potential rate cut by the Federal Reserve (Fed) at their upcoming December meeting. Despite a tech sector shake-up, the markets ended the week with a bang!
The Nasdaq 100, S&P 500, and Dow Jones all closed higher, with the Nasdaq experiencing a remarkable 4.93% surge. However, November's performance was a mixed bag, with the S&P 500 and Dow Jones posting monthly gains, while the Nasdaq 100 saw a 1.64% decline, breaking its seven-month winning streak.
One key factor behind this shift was the drop in NVIDIA's stock, which fell by 12.59%, marking its worst month since March. Investors seemed to be moving away from the AI chip leader, with many flocking to Alphabet, which saw a 13.59% surge last month.
But here's where it gets interesting: this investor rotation appears to be driven by Google Cloud's impressive 34% revenue surge, fueled by the demand for tensor processing units (TPUs) and further boosted by the launch of Gemini 3, Google's powerful multimodal model optimized for TPU clusters.
As we look ahead, several key data releases are on the horizon, including core personal consumption expenditures (PCE) inflation, personal income and spending figures, and the Institute for Supply Management (ISM) purchasing managers' index (PMI) reports.
One of the most crucial releases will be the ISM services PMI, as it provides valuable insights into the US economy, given that services account for a significant portion (around 70-75%) of the country's GDP.
Although this week is a Fed blackout period, we'll still have some key speaking engagements to keep an eye on. Fed Chair Powell is scheduled to speak on Monday, while Fed Governor Bowman will testify before the House Financial Services Committee on Thursday.
Now, let's dive into the ISM services PMI. The October report delivered a pleasant surprise, with the index rising to 52.4 from 50.0 in September, exceeding expectations. However, employment remained a weak spot, with the index still in contraction at 48.2, although slightly improved from September's 47.2.
All eyes are now on the November release. Consensus predicts a modest increase to 52.7, but the market will be closely watching the employment situation. If weakness persists, it could further strengthen the likelihood of a 25 basis point rate cut at the December FOMC meeting, which is currently priced in at around 86%.
Moving on to technical analysis, last Friday's (21 November) rebound above critical support in the 24,000 area for the Nasdaq 100, followed by Monday's (24 November) rally, was a significant turning point. This false break lower suggests that the 23,854 low on 21 November could be the bottom of the correction (Wave IV) from the late October high (Wave III).
Similarly, for the S&P 500, last Friday's (21 November) rebound above critical support at 6550, followed by Monday's (24 November) rally, was an important inflection point. The 6521 low on 21 November is a strong candidate for the bottom of the correction (Wave IV) from the late October high (Wave III).
So, as long as the Nasdaq 100 and S&P 500 remain above their respective medium-term support levels, we can maintain a bullish bias, anticipating a Wave V rally that will test their record highs and potentially push towards new milestones.
