In This Issue

• Market-On-Close: All of last week’s market-moving news and macro context in under 5 minutes.

• Special Coverage: Why are cocoa futes ripping?

• The Latest Investor Sentiment Readings: Is a Santa-rally still on the table?

• Institutional Support & Resistance Levels For Major Indices: Exactly where to look for a turn in markets this weeek

• Institutional Activity By Sector: Our latest readings & why you need to watch this every week

• Top Institutional Orderflow: All of the heaviest-hit individual names targeted by institutions this week on Lit & Dark exchanges

• Investments In Focus: Bull vs Bear arguments for APP, DLTR, SILV, JGRO, FCX

• Top Institutionally-Backed Gainers & Losers: A dreamy watchlist for day traders seeking high-volatility this week

• Normalized Performance By Thematics YTD (Sector, Industry, Factor, Energy, Metals, Currencies, and more)

• Key Econ Events and Earnings On-Deck For This Week

Also, in an effort to be on your platform of choice, I’m now posting regular updates to Bluesky: https://bsky.app/profile/volumeleaders.bsky.social . If you’re on a platform that I’m not yet covering, let me know!

Market-On-Close

Markets Take a Pause Amid Inflation Concerns and Fed Policy Outlook

The global financial markets encountered a momentary lull in momentum this past week, as investor focus shifted back to inflation data and Federal Reserve policy. After a period of robust post-election gains, the S&P 500 surrendered approximately 2% over the week. Despite this setback, the index remains up over 23% for the year and has gained over 1% since Election Day. The narrative driving market sentiment is multifaceted, touching on inflation trends, central bank decisions, tariff policies, and broader economic performance.

Inflation: A Mixed Picture

Inflation has once again taken center stage in market discussions. October’s consumer price index (CPI) data showed headline inflation rising slightly to 2.6% year-over-year, compared to 2.4% in the prior month. Core inflation, which excludes volatile food and energy prices, held steady at 3.3%. While some components, such as energy, gasoline, and new vehicle prices, have eased, others like housing, rent, and motor vehicle insurance remain persistently elevated.

Progress in containing inflation is evident when compared to the 9.1% year-over-year peak reached in June 2022. However, the final leg toward the Federal Reserve's 2% inflation target is proving to be challenging. Persistently high services inflation, driven by labor market dynamics, suggests that the path forward will be uneven.

Looking further ahead, economic growth is expected to moderate, potentially easing inflationary pressures. Should pro-growth policies materialize in 2025 or 2026, inflation may stabilize within the 2%–3% range. For long-term investors, such an outcome, coupled with stable wage growth, could be a positive development, avoiding the spikes in inflation that have plagued consumers in recent years.

Tariff Uncertainty and Inflationary Risks

A recurring theme in inflation discussions is the role of tariffs. While tariffs are often viewed as a tax on consumers, their long-term impact on inflation tends to be muted. Historical examples, such as the tariffs on washing machines in 2018, demonstrate this. Initially, prices surged following the imposition of 20%–50% tariffs, but over time, these prices normalized. In some cases, tariffs have even spurred diversification

of supply chains, as foreign manufacturers relocated production to the United States. The incoming administration’s potential tariff policies have reignited debates around their inflationary effects. However, tariffs are often used as a negotiating tool rather than a long-term economic strategy. As such, their impact on broader inflation dynamics remains uncertain and may be less significant than feared.

Federal Reserve Signals Patience on Rate Cuts

Federal Reserve Chair Jerome Powell underscored the resilience of the U.S. economy during his remarks last week. Despite a slowing labor market, with unemployment at 4.1%, economic growth remains robust compared to other major economies. Powell’s comments suggested no urgency in cutting rates, reinforcing the perception that the Fed’s approach will remain measured.

This stance has tempered market expectations for future rate cuts. As of now, markets anticipate three quarter-point cuts through October 2025, with the federal funds rate expected to drop from its current 4.75% level to a more neutral range of 3.5%–4.0% next year. The gradual nature of these adjustments reflects confidence in the underlying strength of the economy and the Fed's commitment to maintaining inflation control.

Economic Data and Market Sentiment

Economic data releases this week painted a complex picture. Retail sales for October rose 0.4%, slightly above expectations, while September figures were sharply revised upward. Strong consumer spending continues to defy predictions of a slowdown, but it has also rekindled inflation fears.

Meanwhile, manufacturing data was mixed. The New York Fed's Empire State Manufacturing Index surged to 31.2 in November, indicating expansion, while industrial production fell 0.3% in October, partly due to temporary disruptions like the Boeing strike. Import and export prices also showed modest increases, reflecting the interplay of global supply chain dynamics and a strong U.S. dollar.

The bond market responded to these developments with a rise in the 10-year Treasury yield to 4.43%, its highest level in five months. This has added to the psychological barriers for equity markets, as higher yields make stocks less attractive by comparison.

Sector Performance and Corporate News

The dispersion of sector performance underscores the varying impacts of economic trends and policy developments. Technology stocks were among the weakest performers, with the PHLX Semiconductor Index down 3.5% for the week. Major players like Nvidia, Apple, and Microsoft all declined, weighed down by a stronger dollar, higher yields, and concerns about tariffs affecting semiconductor supply chains.

Healthcare stocks also struggled, driven by regulatory fears following the nomination of Robert Kennedy as health secretary. The biotech sector was particularly hard hit, with the Nasdaq Biotech Index down 10% for the week.

In contrast, financials and energy sectors showed resilience. Big banks like JPMorgan Chase and Wells Fargo benefited from expectations of deregulation, while energy stocks were supported by stable oil prices and robust demand. Defensive sectors such as utilities and real estate also managed modest gains, reflecting a cautious shift in investor sentiment.

Looking Ahead: Key Drivers and Risks

The coming weeks will bring critical data and earnings reports that could shape market sentiment. Housing data, retail earnings, and Nvidia’s results are among the headline events. Nvidia, in particular, remains a bellwether for the technology sector, and its guidance will be closely watched.

Policy uncertainty remains a significant overhang. The incoming administration’s tax and trade policies could have far-reaching implications for corporate earnings and market dynamics. Additionally, labor shortages and rising wages in key industries may introduce inflationary pressures, complicating the Fed’s policy path.

Conclusion: Climbing the Wall of Worry

As markets navigate the interplay of economic resilience, inflationary pressures, and policy uncertainty, the path forward is likely to be uneven. However, the underlying strength of the economy, combined with the Fed’s gradual approach to monetary policy, provides a solid foundation for long-term investors.

While short-term volatility is inevitable, especially as markets digest new data and policy developments, the broader outlook remains constructive. Pullbacks should be viewed as opportunities to position for continued growth, as the economy transitions to a more sustainable trajectory. In this environment, disciplined investing and a focus on fundamentals will be key to navigating the challenges and opportunities ahead.

Futures Markets Snapshots