TSM top managers always in demand
The American stock market wrapped up a difficult and tense November on a steady, upbeat note. The final short holiday week turned out to be one of the best this year, allowing the major U.S. indexes to finish November close to flat.
Still, it’s worth noting that despite all efforts from market participants, the NASDAQ Composite – the index of high-tech companies – broke its seven-month streak of continuous growth and lost 1.6% in November amid a recent reassessment of returns on investments in artificial intelligence.
Judging by the results of the last trading week of November, you would hardly guess it. The main drivers of growth this week were tech stocks, especially shares of the leading chipmakers, led by Intel (INTC), the respected veteran of the industry. Intel’s stock ended up as the best performer of the entire S&P 500, adding more than 20% to its already sizable market cap.
What is interesting is that the surge in demand for Intel shares has less to do with business success and more with a scandal triggered by accusations from Intel’s rival, Taiwan Semiconductor Manufacturing Company (TSM). TSM claims that Intel poached one of its top employees, former TSM vice president Mr. Wei-Jen Luo, who, according to the company, possesses corporate secrets.
Even so, one way or another, Intel was not alone. Other important chipmakers, such as Broadcom (AVGO), Micron Technology (MU) and others, were also in heavy demand. It was these companies that helped all the US indexes deliver some of their best results of the year during the holiday week. The NASDAQ Composite rose nearly 5% for the week, which significantly improved its otherwise weak November performance. The gains in the other major U.S. indexes, the Dow Jones at 3.18% and the S&P 500 at 3.73%, were smaller, but still very solid.
The ITS index family also delivered excellent results, with the ITS World Index of global companies up 3.41% and the ITS Shariah Index of Islamic securities up 4.65%. The ITSS Index looked especially strong, finishing the week near its historical highs. It is, by the way, the only index tracking the dynamics of the American market that sits less than 1% away from its all-time highs.
If we were to ask what exactly drove investors and pushed the market sharply higher, then aside from Intel’s “theft” of a TSM top manager, the key factor was the rising confidence that the Federal Reserve will cut rates by another 0.25 percentage point at its upcoming meeting, which could become a serious pillar for further market growth. The probability of such a move jumped from 37% a week earlier, to more than 80%. And, of course, we cannot ignore Thanksgiving itself, a holiday Americans traditionally prefer to celebrate in high spirits. As market performance shows, they had good reason to do so this year.
Market expectations for December 1
This week will be very important for the entire stock market. It is worth noting right away that no major events seem to be on the horizon. It is expected to be an ordinary working week and not particularly rich in news.
Still, there will definitely be things to watch and things to listen to. Today, Monday, December 1, a discussion will take place at Stanford with Jerome Powell, Michael Boskin and Condoleezza Rice. As we can see, all three speakers are well known and highly respected, and it is quite possible that something nontrivial will be said during the discussion, something that will stir investors’ minds. So, we are looking forward to this event with interest.
As for macro data releases, the key one will be the ADP report on the number of new jobs, which is always important and always of interest. This is especially true now, since the official labor market data will only be published in mid-December, due to the recently ended shutdown.
In addition, consumer inflation data will be released at the end of the week. However, these figures will only reflect the results for September, because of the shutdown, which means they will already be largely outdated.
Finally, corporate earnings. The season is basically over, but there are still a few interesting reports ahead. First of all, we will see results from well-known retailers, such as Dollar Tree (DLTR) and Dollar General (DG). These discount chains often surprise their shareholders. Let’s hope that if surprises do come, they will only be positive.
Another earnings report from another retailer, the department store chain Macy’s (M), hugely popular with Americans, will come out on Wednesday before the market opens. And here we can expect solid activity, which often occurs in the shares of this remarkable and unpredictable company.
As for the current mood, Monday is unfortunately opening in the red. Futures on the major U.S. indexes are steadily losing about 0.5%. However, as they say, the day is not over yet. We are all waiting for Powell’s speech at Stanford, single phrase from which can easily change market sentiment. In addition, the first data on Black Friday sales is expected later today. This is, as we know, a good indicator of the overall health of the American consumer. So, for now, the current market dip can be viewed simply as a bit of profit taking after a very strong week.
Even so, we have to understand that this week should show us what to expect toward the end of the year. Are investors ready to keep buying, or have they spent all their strength and resources on celebrating Thanksgiving properly, leaving nothing for further moves? Let’s hope that is not the case.