Morning in New York: Fed on the side of the bulls

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

The key factor supporting positive sentiment remains the growing confidence of market participants in the continuation of monetary policy easing. US stock futures on this background continue their growth attempts after the rebound on Friday. The coming trading week will be shortened due to the Thanksgiving holiday: on November 27, American exchanges will be closed, and on November 28, trading will be held in a reduced mode.

The macroeconomic calendar for today includes the publication of business activity indices from FRB Dallas and Chicago. Based on these data, the investment community will have an opportunity to assess the state of the regional economies. Weak results will be an additional argument in favor of further easing of monetary policy, while strong data may somewhat cool optimism in this regard.

According to the negotiators, the discussion of a peace settlement plan in Ukraine is going well, but key security issues remain unresolved.

The reporting season is actually over: quarterly releases were issued by about 95% of companies from the S&P 500. According to FactSet, the forecast of profit growth for the reporting period was raised to 13.4% y/y. Woodward (WWD) will report results before the open of trading. Agilent (A), Keysight Technologies (KEYS), Zoom Video (ZM), Fluence Energy (FLNC ), Symbotic (SYM) and Semtech (SMTC ) will report after the end of the main session.

We assess the balance of risks for the upcoming trades as positive with neutral volatility. We focus on S&P 500 fluctuations in the range of 6570-6670 points (from -0.5% to +1% of the previous session's closing level).

- BHP (BHP) has withdrawn its final takeover offer for Anglo American. The deal, which could have created a dominant player in the copper market, was valued at tens of billions of dollars. BHP won't be able to make a new offer for six months.

- As part of a lawsuit against major tech companies, documents have been uncovered that show Meta (META) halted a Project Mercury study in 2019. Its preliminary results showed that stopping using Facebook for just a week reduced users' levels of depression and anxiety.

- Snap (SNAP) has unveiled a new age verification system in Australia ahead of a law banning social networks for under-16s coming into force. The company, which faces a fine of up to 49.5 million Australian dollars, will use bank data to confirm the age of about 440,000 Australian users.

- Eli Lilly (LLY) has become the first pharmaceutical company in history to reach $1 trillion in market capitalization. The key driver of growth was a frenzy of demand for its weight loss products, which brought it more than $10 billion in revenue in the last quarter. The company's shares have risen more than 35% since the beginning of the year.

- Elon Musk announced that Tesla (TSLA) is finalizing design work on its own AI5 chip and is beginning development of next-generation microprocessors (AI6) that will be used in cars and data centers.

November 21 trading on American stock exchanges ended with a steady growth. The S&P 500 added 0.98%, the NASDAQ 100 rose 0.77%, the Dow Jones rose 1.08%, and the Russell 2000 gained 2.8%. The equal-weighted S&P 500 Index (RSP: +1.97%) significantly outperformed its capitalization-weighted counterpart, indicating the breadth of the rally beyond the tech giants.

The shares of the "Magnificent Seven" traded mixed: the growth leader was Alphabet (GOOGL: +3.53%), while Microsoft (MSFT: -1.32%) was under pressure. All sectors closed in the plus. Commodity companies (XLB: +2.24%) and the healthcare sector (XLV: +2.11%) showed the most pronounced positive dynamics in the broad market.

The main support for buyers was provided by the statement of the head of the FRB of New York John Williams about the possibility of a rate cut in the near future in order to bring the policy closer to the neutral level. Against this background, market expectations for a rate cut in December soared from 20% to more than 70%. Other Fed officials - Susan Collins and Laurie Logan - took a tougher stance, but their comments were ignored by the market.

The macro statistics published on the same day were mixed. Preliminary PMI data for November in the services sector exceeded average expectations, while business activity in manufacturing was weaker than expected. The final estimate of the University of Michigan's consumer sentiment index (51 points) matched consensus, becoming the lowest final reading since mid-2022. A positive signal in this report was a decline in both annual and five-year inflation expectations. In addition, the Bureau of Labor Statistics officially announced the cancellation of the release of consumer inflation (CPI) data for October, exacerbating the dearth of data to analyze the economy.

- Results for the third quarter, in which comparable sales significantly exceeded expectations, as well as an improvement in its own guidance for the next reporting period drove Ross Stores shares (ROST: +8.4%) higher.

- Quotes of Gap (GAP: +8.2%) reacted positively to the release of the quarterly report and the increase in the annual forecast. The company's key brands, including Old Navy, Gap and Banana Republic, showed strong results.

- Intuit (INTU: +4.0%) reported better than average market guidance. Analysts noted that the company is successfully incorporating the benefits of AI-based automation into its products.

- News of the sale of the Clean Earth division to Veolia for $3 billion led Enviri stock (NVRI: +28.2%) to soar.

This article was AI-translated and verified by a human editor