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Market Breakdown for the week.

Hope you are all doing well. Happy Thanksgiving! U.S. stock indexes climbed for the third week in a row as the S&P 500, the NASDAQ, and the Dow posted total returns of more than 2%. The biggest gains came from smaller stocks, as a small-cap benchmark, the Russell 2000 Index, surged more than 5%. In honor of Thanksgiving I broke down this week’s update using my favorite Thanksgiving  traditions.

Taking A Post Meal Nap.

After months of surging and causing market volatility.  Both inflation and market volatility are napping. Economic data continues to strike the right balance (not too hot or too cold), helping stocks reach a two-month high and placing the October correction in the rearview mirror. With inflation trending in the right direction,  U.S. stock market volatility fell for the fourth week in a row.

This week’s report showed U.S. inflation continued to moderate in October. Excluding the volatile food and energy categories inflation rose at the slowest annual pace since September 2021. The so-called core rate was 4.0%, which was slightly below most economists’ forecasts, as was the headline number of 3.2% which factors in food and energy.  A check under the hood of the report reveals some encouraging pieces of data. The price of goods outright declined in October for the fifth consecutive month, largely driven by falling used car and truck prices. Private wholesale data suggest  that we could see further declines in used car prices ahead. Outside of autos, the improvement in supply chains and lower transportation costs are consistent with decreasing prices for other goods.

The number I continue to watch, shelter inflation remains the biggest contributor to overall CPI, but on the positive side the pace of monthly increases slowed in October. The steep decline in price increases for newly signed leases should keep housing inflation trending lower through most of 2024. The market is still trying to gauge what the Fed is going to do and these numbers give hope to those waiting for an end to the rate hiking cycle.

Macy’s Thanksgiving Day Parade.

Hopefully the parade can fire up shoppers to go spend this holiday season at Macy’s and other retail stores. U.S. consumers trimmed their spending ahead of the holiday shopping season as U.S. retail sales slipped 0.1% in October compared with the same month a year earlier. The result marked the first retail sales decline in seven months and followed a 0.9% increase in September.

Backyard Football Game.

The Biden administration is  running  a no huddle offense to keep the price of oil down.  An increase in U.S. crude inventories was among the factors that sent oil prices to their fourth weekly decline in a row. The latest week was volatile, as the price of U.S. crude rose to nearly $80 per barrel on Tuesday, only to drop below $73 on Thursday and rebound to nearly $76 on Friday. The price was around $89 as recently as October 20. I have my doubts about the strategy because I don’t think it is sustainable long term but for the moment the aggressive release of oil reserves is keeping the price down.

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