In This Issue

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

• Special Coverage: What’s driving gold higher? Where is it heading? Is there a bear case?

• The Latest Investor Sentiment Readings

• Institutional Support & Resistance Levels For Major Indices: Exactly where to look for a turn in markets this week in SPY, QQQ, IWM & DIA

• Institutional Activity By Sector: Institutional flow by sector including top names in those sectors

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

• Investments In Focus: Bull vs Bear arguments for RDDT, SPHR, AZTA, VGLT, RGLD, FLEX

• Top Institutionally-Backed Gainers & Losers: An explosive watchlist for day traders seeking high-volatility

• Normalized Performance By Thematics YTD (Sector, Industry, Factor, Energy, Metals, Currencies, and more): which corners of the markets are beating benchmarks, overlooked and over-crowded

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

Market-On-Close

The U.S. equity markets displayed robust performance over the past week, highlighting resilience and optimism heading into the year-end and 2025. Despite elevated valuations and potential policy uncertainties, the markets sustained a positive trajectory, buoyed by strong corporate earnings, resilient economic fundamentals, and broader sector participation. This weekly review explores the key drivers of the market’s strength, emerging risks, and how investors can position themselves in an evolving landscape.

Market Overview and Performance

Major U.S. stock indexes rebounded strongly, recovering losses from the prior week. The Dow Jones Industrial Average outpaced the broader market, achieving a new record high, while the S&P 500 finished just shy of its own record. The Nasdaq Composite trailed slightly, reflecting softness in mega-cap technology stocks, particularly after NVIDIA’s earnings report. In contrast, smaller-cap stocks, as represented by the Russell 2000, surged, delivering a 4.5% weekly gain. This rally reflected a rotation into cyclical and value-oriented sectors.

Bitcoin also extended its rally, climbing to new record highs, with a week-over-week gain exceeding 10%. This resurgence underscores investor appetite for speculative assets in an environment of improving sentiment and anticipation of a favorable policy environment under the incoming U.S. administration.

Corporate Earnings and Sector Analysis

Corporate earnings continued to support market performance. With nearly all third-quarter results reported, S&P 500 companies are expected to post an average year-over-year earnings gain of 5.8%, marking the fifth consecutive quarter of growth. Notable outperformers included Gap and Ross Stores, which reported earnings above expectations, buoyed by resilient consumer demand. Conversely, mega-cap tech names like NVIDIA, Alphabet, and Amazon underperformed, reflecting a mix of profit-taking and concerns over high expectations.

NVIDIA’s quarterly results underscored the dichotomy within the tech sector. While the company reported sales nearly doubling from the previous year, its guidance for slower fourth-quarter revenue growth dampened investor enthusiasm. This highlights the challenge of sustaining high growth expectations, even in sectors like AI that remain poised for long-term expansion. The underperformance of semiconductors also mirrored broader concerns over tighter export restrictions to China, a policy focus of the incoming administration.

Meanwhile, cyclical sectors like industrials, energy, and financials outperformed, driven by improving economic indicators and optimism surrounding potential pro-growth policies. Companies such as Caterpillar and Deere benefited from strong buying interest, while energy stocks rebounded amid a 6% rise in crude oil prices.

Valuations and Broader Market Trends

U.S. large-cap valuations remain elevated, with the forward price-to-earnings (P/E) ratio of the S&P 500 approximately 22, well above its historical average. However, this elevated valuation is largely concentrated in mega-cap technology stocks. Equal-weighted indices, along with mid- and small-cap stocks, trade closer to or below their historical averages, offering potential opportunities for investors seeking diversification.

This broadening of market leadership is a healthy development, as it reduces reliance on a narrow set of high-performing stocks. As of last week, 72% of S&P 500 stocks traded above their 200-day moving averages, indicating improving market breadth. Value stocks outpaced growth counterparts, with the Russell 2000 small-cap index delivering notable gains, reflecting investor rotation into less expensive and more domestically focused assets.

Economic Indicators and Policy Outlook

Macroeconomic data provided additional tailwinds for the market. Initial jobless claims declined unexpectedly to 213,000, their lowest level since April, signaling continued labor market strength. Existing home sales also rebounded, rising year-over-year for the first time since mid-2021, supported by stabilizing mortgage rates and steady job growth.

Looking ahead, the Federal Reserve’s policy remains a focal point. While inflation has moderated, the pace of disinflation has slowed, and the labor market remains tight. The market is pricing in a roughly 50% chance of a rate cut at the Fed’s December meeting, with upcoming inflation and jobs data likely to influence the decision. The divergence in Treasury yields, with short-term rates rising and long-term rates declining, reflects a cautious but optimistic outlook.

Tariffs and Inflation Concerns

Policy uncertainty, particularly surrounding tariffs, looms as a potential risk. The incoming administration’s proposal for universal tariffs could introduce inflationary pressures, as higher import costs may act as a de facto tax on consumers. However, the impact may be mitigated by currency adjustments, supply chain shifts, and exporters absorbing some of the additional costs. Historically, tariffs have contributed modestly to inflation and growth dynamics, and their ultimate impact will depend on the broader policy mix.

Investment Implications and Strategies

As valuations remain elevated in parts of the market, diversification becomes increasingly important. Value-style investments, as well as small- and mid-cap stocks, offer relative bargains and are poised to benefit from stronger domestic growth and potential policy shifts, such as lower tax rates. Conversely, mega-cap tech stocks with significant international exposure may face headwinds from geopolitical and trade uncertainties.

Investors are encouraged to maintain a balanced approach, with allocations across asset classes and sectors to navigate potential volatility. Given the supportive backdrop of resilient economic growth, rising corporate profits, and the prospect of rate cuts, equities appear well-positioned to build on their strength as leadership continues to broaden.

Conclusion

The U.S. equity markets demonstrated resilience and adaptability last week, supported by robust earnings, improving economic data, and a rotation into undervalued sectors. While risks such as elevated valuations, policy uncertainty, and geopolitical tensions persist, the broader market dynamics point to sustained strength heading into 2025. Investors who focus on diversification and align their portfolios with evolving market conditions are likely to benefit from the opportunities ahead. As the year progresses, monitoring key economic indicators and policy developments will remain critical in navigating an increasingly complex investment landscape.

Futures Markets Snapshots