Has Good News Been Baked in for Investors?
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How did U.S. stocks perform in late November and what market rally closed the month?
With your money briefing, I'm Charlie Turner in New York for The Wall Street Journal. U.S. stocks ended the week and the month with a strong rally on Friday. The Dow Jones Industrials rose 199 points to 25,538. The Nasdaq Composite gained 57 points and the S&P 500 added 22. For the week, the Dow added nearly 5% while the Nasdaq and S&P were both 5% higher. And both the Dow and S&P closed out November with a gain of more than 1% each. NASDAQ lost a fraction of a percent. Joining us is Akani Ohtani, the markets reporter for The Wall Street Journal. So, Akani, the markets basically stabilized in November after a big sell-off. And obviously the markets had a great week. What has driven the rebound as of late?
Well, I think for starters, there's a big relief over the Fed and what we're expecting them to do over the following year. And it's a little bit interesting because some folks out there are saying the markets have overreacted to what we're seeing. But essentially, the Fed earlier in the week signaled that it could take a more gentle pace when it comes to rate increases in the following year.
What Fed signals sparked the recent rebound and could markets have overreacted?
So that means we'll probably see a rate increase in December. But what's next after that is a little bit more up in the air than it seemed to be previously. And that's good news for stocks and bonds, which really came under pressure back in February, in part because of fears around rate increases.
Was there a bit of an overreaction to what Jerome Powell said in the middle of the week as far as interest rates being just below that neutral level?
That's the big question. And I think when it comes to Powell, a lot of the bond traders in particular that I spoke to earlier in the week said that he really was careful to leave room for the Fed to sort of tweak its definition of what a neutral range of rates might look like. And so that means if we start seeing unexpectedly strong economic data or signs that inflation is actually picking up faster than expected, that would theoretically leave the Fed room to revise its expectations for rate increases again. So there were definitely people saying the markets may have rallied a little bit too much on that news.
Do you think his testimony this coming week in front of the Joint Economic Committee, that's going to be a closely watched event?
Definitely. And I think that's especially true when we look at all of the things that have happened in markets in November that weren't necessarily reflected in the most recent Fed minutes that we took a look at. So oil prices fell into bear market territory. We had stocks going through some volatile bits there and more weak data out of the housing sector. And those are all things that I think investors are waiting for the Fed to comment on in greater detail to see if those sort of downbeat aspects of the markets and the economy do anything to shape their view of rate increases heading into the new year.
There are some stock sectors that have picked up the slack for weaker sectors.
How might Jerome Powell's upcoming testimony affect rate expectations and market outlook?
Technology has been a weak spot, but I think other stock sectors have picked up the slack.
That's right. We actually saw real estate sector finish up 5.3% in November. That was almost triple what the S&P 500 did, which is really kind of funny when you think about what the housing sector has looked like as of late. I mean, in November, we got data showing new home sales falling at the fastest rate since 2017. We saw more signs of home price gains slowing. I mean, overall, I think when you ask investors what's the one area of the economy you're most worried about, They tend to say housing these days. So the fact that we're seeing a rally in real estate sectors, real estate shares, I think people are saying that speaks more to investors' desire for dividend-paying stocks at this moment rather than confidence in the health of the real estate sector.
There seems like there's so much happening. You know, there's still trade worries. Global economic growth has slowed. Oil prices, I think, briefly fell below $50 a barrel. We mentioned the housing market.
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Chapters
6 chapters
1
How did U.S. stocks perform in late November and what market rally closed the month?
0:05–1:15
2
What Fed signals sparked the recent rebound and could markets have overreacted?
1:15–3:07
3
How might Jerome Powell's upcoming testimony affect rate expectations and market outlook?
3:07–4:11
4
Why did real estate stocks rally despite weak housing data and what does that signal?
4:11–4:42
5
Has positive economic news been 'priced in' and what downside risks remain for investors?
4:42–5:33
6
What key economic reports and corporate earnings should investors watch next week?
5:33–6:22
Speakers
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