05 Dec Market Activity Stalled After Wednesday Major Indices Record Highs

We saw the stock market activity coming to a stalled state after the market experienced record highs for major indices.

S&P 500 saw its record-setting stock rally came down to a stall ahead of Friday morning’s jobs report, declined by 0.19%. NASDAQ also dipped by 0.17% while DJIA fell by 0.55%. The Russell 2000 also lagged behind, closing 1.3% lower.

Buyer enthusiasm was pretty quiet and there is also minimal urgency among sellers, which result in lackluster price action at the index level.

I think as investors we can continue to trust Nvidia as this stock is a long term play with the AI development growing and we can see major player like Nvidia commitment to expanding its global AI footprint.

The weekly labor claims report does not indicate any major changes in labor market trends, which show some softening but no significant disruptions in employment.

The Weekly Initial Claims came in at 224K with consensus at 213K while previous was revised to 215K from 213K. The Weekly Continuing Claims also came in lower at 1.871 million while previous was revised to 1.896 million from 1.907 million.

The October trade balance reflects overall weakness in global trade activity in October. The October Trade Balance was weaker at -$73.8 billion compared to consensus at -$75.1 billion) while the previous was revised to -$83.8 billion from -$84.4 billion.

U.S. employers likely added 200,000 jobs in November, compared to 12,000 in October. If predictions are correct, the uptick would represent a rebound to normal levels from a slump caused by hurricanes Milton and Helene.

The job situation could heavily influence Federal Reserve officials' decision at their next meeting in December, where they must decide whether to cut the central bank's benchmark interest rate. If employers hire faster than anticipated, Fed officials might see less urgency to cut rates.

As seen from CME Watch tool, we can see that the probability for a December rate cut has decreased from 78% to 71% for a 25 basis point cut.

Mega-cap stocks traded in a mixed fashion, contributing to the overall tepid market sentiment. Tesla (TSLA) rose by 3.2%, and Amazon (AMZN) gained 1.1%, helping to lift the S&P 500 consumer discretionary sector by 1.0%. However, retailer components within the consumer discretionary sector showed relative weakness as earnings reports emerged.

The SPDR S&P Retailer ETF (XRT) fell by 1.6%. Noteworthy performances in the retail space included American Eagle Outfitters (AEO), Dollar General (DG), and Five Below (FIVE).

In contrast to the stock market, the cryptocurrency market showed notable strength, with Bitcoin surging above $100,000. The semiconductor sector was in focus as the PHLX Semiconductor Index (SOX) dropped 1.9% due to normal profit-taking activity after a strong performance earlier in the week. Despite this decline, the SOX remains 2.0% higher than last Friday. Nearly all SOX components closed lower, including NVIDIA (NVDA) and Broadcom (AVGO).

Treasury yields retreated from earlier highs, settling slightly mixed. The 10-year yield, which briefly surpassed 4.22%, ended the day unchanged at 4.18%. The 2-year yield eased from 4.17% to 4.15%, three basis points higher than yesterday.

But we saw the note yield rising after market close, with 2-year yield gaining six basis points to 4.156%. And 10-year yield also gained four basis points to 4.179%.

There will be more upside movement expected from SOUN because if we looked at how the MACD is moving, there is no signs of slowing down, and SOUN has given a clear confirmation from MTF and by trading above both short-term and long-term MA comfortably.

UiPath (PATH) reported a strong Q3 performance, with a Non-GAAP EPS of $0.11 beating expectations by $0.04, and revenue of $354.65 million surpassing estimates by $6.93 million. The company's annual recurring revenue increased by 17% year-over-year, and shares rose by 8.09% following the announcement. UiPath has positioned itself as a key player in the robotic process automation sector.

GameStop (GME) shares climbed over 10% after Keith Gill, known as Roaring Kitty, posted a cryptic image on social media, sparking interest among retail investors. This led to a temporary halt in trading due to volatility. AMC Entertainment (AMC) also saw a rise of more than 6%, as both stocks continue to be popular among meme stock enthusiasts.

Shares of U.S. air carriers climbed higher after American Airlines (AAL) and Southwest Airlines (LUV) boosted their guidance, citing robust travel demand. American also announced an extension of its card partnership with Citi (C). American Airlines (AAL) shares surged more than 15% after the company raised its fourth-quarter adjusted earnings forecast, signaling a positive outlook for the airline industry during the holiday season. The revised earnings per share estimate now ranges from $0.55 to $0.75, up from the previous $0.25 to $0.50.

DocuSign (DOCU) reported Q3 results that exceeded expectations, with a Non-GAAP EPS of $0.90 and revenue of $754.82 million. The company's subscription revenue increased by 8% year-over-year, demonstrating continued growth in the digital document management space.

I would think that market activity would remain slowed, as we await and comprehend the labor data on Friday, because the probability of a rate cut of 25 basis points for December has dropped.

Market could have priced in this rate cut, so if that does not happen, we could see some volatilty. Another item to watch is Bitcoin, I think there will be another attempt to hit $100K again either on Friday or over the weekend.

Appreciate if you could share your thoughts in the comment section whether you think market could still be trading in a slowed activity.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.