Market Note – November 26, 2024

By Hightower Great Lakes on November 26, 2024

Recapping the Last Few Weeks

Markets have had a lot to digest over the last three weeks. The U.S. presidential election, the November Fed meeting, China’s stimulus package, heightened geopolitical tensions, October inflation data, and a slew of third-quarter earnings.

With a week to go in November, the S&P 500 is up 3.4% month-to-date, and 25% year-to-date, and the Atlanta Fed GDP tracker is estimating a 2.6% annualized growth rate in the fourth quarter – supportive of an expanding economy.

We were encouraged by strong retail sales in October along with solid third-quarter reports from major retailers; Walmart (WMT), Amazon (AMZN), and Gap (GAP) to name a few.

Chart 1: The S&P 500 and Nasdaq Are Both Up 25% Year-To-Date[1]

Third-Quarter Earnings Come in Better Than Expected

95% of S&P 500 constituents have reported third-quarter results and performance for the quarter has surprised to the upside. 75% of companies reported positive earnings per share (EPS) surprise and 61% reported a positive revenue surprise.

The blended y/y earnings growth rate is 5.8% which marks the fifth straight quarter of earnings growth – above estimates of 4.2% y/y growth.

Two companies we follow, GAP and Snowflake (SNOW), both reported solid results last week. GAP beat estimates across the board and raised its full-year outlook for net sales, gross margin, and operating income.

One of its fastest-growing brands, Athleta, grew sales by 5% y/y. The company’s new CEO Richard Dixon continues to focus on cost-cutting with gross and operating margins both expanding by 140 and 270 basis points respectively. GAP also recently hired a new CEO for Athleta, and Old Navy, and creative director for all the brands they own.

SNOW grew revenues 28% y/y and raised revenue forecasts for 2025. The company announced a number of new artificial intelligence partnerships; they acquired Datavolo, a data integration platform, and also signed a deal with Anthropic to use its large language model in SNOW products.[2] The stock rose 32% following the earnings release for its best day in its history.

Chart 2: SNOW and GAP Are Up 45% and 19% Respectively in November[3]

Fixed Income

U.S. Treasury yields continued to flatten last week. The 10-year yield fell by 4 bps while the 2-year rose by 7 bps, bringing the 2s10s curve to just +3 bps.

Investment Grade spreads finished the week higher by 1 bp to +120, while high yield spreads were tighter by 10 bps at +304.

U.S. credit ratings deteriorated, and the main rating agencies issued 57 downgrades and 44 upgrades. Municipal yields were lower across the week, falling 1-5bps across the curve. 

The Week Ahead

Earnings – Monday: A; Tuesday: ADI, ADSK, BBY, CRWD, DELL, HPQ, SJM.

Economics – Tuesday: FHFA Home Price Index, Consumer Confidence, New Home Sales; Wednesday: Durable Orders, Second Preliminary Q3 GDP, Initial Claims, Personal Income, Wholesale Inventories, October PCE, Pending Home Sales.

Return for Selected Indices^[4]

Click here to read last week’s Market Note (11/21).

Disclosures

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This document was created for informational purposes only; the opinions expressed herein are solely those of the author(s) and do not represent those of Hightower Advisors, LLC, or any of its affiliates.

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[1] Source: FactSet. As of November 24, 2024.

[2] Source: Investopedia. As of November 21, 2024.

[3] Source: FactSet. As of November 25, 2024.

[4] Source: Bloomberg. As of November 25, 2024.