November 26, 2024 | RTY/NDX Index Ratio

MARKETS

S&P 500: Up +25 points to 6012, VIX: 14.12

Asia: Japan -0.87%, China -0.12%, Hong Kong +0.04%

Europe: Euro Stoxx 50 -0.66%, FTSE -0.38%, DAX -0.50%

FX: USD (DXY) up 0.25%, EUR down 0.29%, GBP down 0.20%, JPY up 0.37%, CNY down 0.05%

Energy: WTI Crude up 0.86% to $69.55, Brent up 0.81% to $73.60

Cross markets: Terminal rate unch at 4.59, Implied rate cuts 2-years from terminal up ~10bp at 80bp, 2/10 yield spread +3bp

Treasuries: 2-year yields up ~2bp at 4.285%, 10-year yields up ~4bp at 4.314%, 30-year yields up ~2bp at 4.489%

WHAT WE'RE THINKING

Snapshot: US equities are mostly higher despite tariff threats weighing on cyclical themes that led markets over the past three sessions.  The Russell 2000 (RTY) and equal-weight S&P (SPW) are lower on the day, while the cap weighted S&P 500 (SPX) and tech-heavy Nasdaq 100 (NDX) advance.  Independent power producers NRG, CEG and VST outperform after a sell-side upgrade, while shares of LLY and NVO benefit from a White House proposal for Medicare and Medicaid to cover GLP-1 medications.  GLP-1 hopeful AMGN is the worst performing stock in the SPX on slightly disappointing Meritide efficacy/tolerability data. Treasury yields are a bit higher after yesterday’s big pullback.  The Dollar Index is also higher with tariff headlines weighing on CAD and MXN.    Gold is little changed, while WTI is lower for a second day on Middle East ceasefire headlines. 

• President-elect Trump’s threat to impose an additional 10% tariff on goods manufactured in China and 25% tariffs on Mexico/Canada are the big drivers this morning. The headlines shift the market attention back to election-related risks following improved sentiment yesterday on Trump’s nomination of Bessent for Treasury Secretary.  
• Macro data this morning featured updates on housing, inflation and consumer confidence. The Conference Board's consumer confidence index improved in November with one-year inflation expectations falling to the lowest since March ‘20.  October New home sales were much worse than expected, falling -17.3% MoM, while housing prices cooled with the September Case-Shiller 20-city index rising +0.2% MoM, which was light of consensus and slower than August.  November FOMC minutes will be released later this morning.  
• Yesterday, Minneapolis Fed President  Kashkari said it’s still appropriate to consider a rate cut at the December meeting.  
• Macro data in focus tomorrow includes the second release of Q2 GDP, durable goods orders, weekly jobless claims, Chicago PMI, pending home sales and core PCE inflation.  There’s no US data scheduled on Thanksgiving or Friday when markets close early at 10am PT.
• Japan services PPI for October came in hotter-than-expected, up +2.9% YoY vs. consensus for +2.5% and up from +2.8% in September. UK retail deflation also moderated in November. The back half of the week includes rate decisions from the RBNZ and Bank of Korea, while China PMIs will be released over the weekend.  
• EMBC, SJM, SMTC and WWD are earnings-driven winners this morning, while shares of AMWD, ANF, BLBD, BURL, BBY, KSS, LESL and ZM trade lower after reporting.  Afternoon highlights include results from ADSK, CRWD, DELL, GES, HPQ, JWN, URBN and WDAY. 

Chartist: The SPX maintains bullish trend dynamics at levels above 5600 with our Russell 2000/Nasdaq 100 Index ratio (RTY/NDX) now signaling an increased likelihood for the next leg to be led by cyclically-sensitive sectors.  Yesterday, the RTY/NDX Index ratio managed to break above its YTD based pattern at 0.116 with sustained higher closing levels increasing our conviction in a more lasting cyclically-led bull market.  On its own, the RTY has carved out a bullish technical progression following a 2.5 year base pattern that coincided with the widest RTY/SPX performance gap in history of nearly 40 percentage points.  While the potential for an RTY catch up trade seems like a compelling opportunity, we note a rich forward multiple of ~22x that roughly matches that of the SPX.  Our preference is to find incremental cyclical exposure in companies from the S&P Midcap 400 (MID) that trades at only ~16x forward EPS.  

Risk: The rapid pace of technological innovation and government change introduces strong cyclical tailwinds and fatter tail risks in our opinion.  And a broader distribution of risk/reward requires a more flexible investment approach than what many investors currently have in place.  

FACT OF THE DAY

Cocktail tumblers are thicker on the bottom so non-liquid ingredients can be muddled in the glass before liquids are added. 

JSC IN THE MEDIA

The Close on Bloomberg:  Andrew discusses AMDs downbeat earnings report and its challenges gaining meaningful market share in AI training. He also highlights a potential opportunity for AMD and others when the majority of AI workloads transition from the training to inferencing. Watch Now

American Express Earnings: Andrew discusses AXP as a relative safe haven and fully-valued stock, while shifting attention to the opportunity in regional banks. Watch Now

Markets react as tensions rise in the Middle East: Andrew comments on recent events in the context of a market that is richly valued and therefore more sensitive to shocks of all kinds. Read on Reuters

See more of JSC in the Media.

THIS DAY IN HISTORY

November 26, 1922: Archaeologist Howard Carter (below left) and Lord Carnarvon (below right) look into King Tutankhamen's tomb for the first time. Lord Carnarvon, who financed the excavation, died five months later due to an infected mosquito bite, leading many to speculate that his death was caused by a curse put in place by priests to guard the royal tomb.

CATALYST CALENDAR

Tomorrow: 1) US GDP/PCE revisions for Q3; 2) US October PCE for October; 3) US durable/capital goods for October; 4) US weekly jobless claims; 5) US personal income/spending for October; 6) US pending home sales for October; 7) South Korea rate decision.

Thursday: 1) Spain November CPI. 2) German November regional CPIs; 3) Eurozone M3 money supply data for October; 4) South Korea industrial production for October; 5) ), Japan Tokyo CPI for November; 6) Japan retail sales/industrial production for October.

Friday: 1) Chicago PMI for November; 2) France November CPI; 3) Germany unemployment numbers for November; 4) ECB inflation expectations for October; 5) the Eurozone November CPI; 6) India GDP for Q3; China NBS PMIs for November.

Jackson Square Capital produces Inside Markets. We also offer financial planning and investment management services. Learn more here and catch up on our recent media appearances.

Investment Advisory Services offered through Jackson Square Capital, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission.

This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.