Opening Market Update

Published as of: December 3, 2024, 9:03 a.m. ET

(Tuesday market open) The wait is on for the latest read on U.S. employment trends, and stocks flattened ahead of the data following yesterday's record close. Job openings are due later this morning followed by several Federal Reserve speakers, with Fed Chairman Jerome Powell waiting in the wings tomorrow.

The week began with two of the three major indexes posting record highs Monday, but investors should keep that in perspective. Mega caps like Apple (AAPL) and Tesla (TSLA) and their hefty market capitalizations caused most of the surge, with the majority of S&P 500^® (SPX) stocks actually falling.

This raised concerns about whether the rotation away from mega caps that supported the market's recent wider breadth might be fading. However, it was just one session, and mega caps were mixed ahead of Tuesday's open.

Yesterday's gains also came amid relatively light volume and a notable lack of truly market-moving news, leading to questions about possible conviction behind the rally. By today, most participants who took an extra day of holiday are possibly back and may bring volume up to normal, but that remains to be seen.

Maybe the low volume reflected people getting distracted while shopping for Cyber Monday. Positive consumer spending data continues to drive markets with Cyber Monday sales coming in slightly above estimates at $13.5 billion, according to Adobe (ADBE) analytics.

Those who did make it back today await this morning's Job Openings and Labor Turnover Survey (JOLTS) data for October as well as several Fed speakers. In addition, Salesforce (CRM) reports after the close.

In pre-market trading today, futures based on the SPX were flat, and the Nasdaq-100^® (NDX) were flat. Futures based on the Dow Jones Industrial Average ($DJI) were flat.

• The 10-year U.S. Treasury yield (TNX) is unchanged at 4.19%.
• The U.S. Dollar Index ($DXY) is steady at 106.25.
• The CBOE Volatility Index^® (VIX) is flat at 13.32.
• WTI Crude Oil (/CL) climbed 1.6% to $69.19 per barrel ahead of Thursday's OPEC meeting on production.
• Bitcoin (BTC) slid 1.5% to $94,415.

The October Job Openings and Labor Turnover Survey, due shortly after today's opening bell, is expected to show openings at 7.49 million, according to Trading Economics, barely changed from September and still near three-year lows. The relatively low JOLTs figures accompanied by recent low initial weekly jobless claims suggests to some analysts that recent softness in the labor market reflects lack of openings more than layoffs. Thursday's monthly Challenger job cuts data might be insightful on that front.

Yesterday, Atlanta Fed President Raphael Bostic said he thinks the decline in job vacancies reflects the Fed's restrictive monetary policy helping cool the labor market, Bloomberg reported. However, he doesn't see signs of rapid deterioration in the jobs picture, saying the cooling is happening "in a largely orderly fashion."

JOLTS might whet investors' appetites for the monthly nonfarm payrolls report due Friday morning. This report is always a major attraction and this month's might be watched more closely than normal considering October's reading was soft due to strikes and hurricanes.

The early average expectation for November jobs growth is 195,000, according to Trading Economics, up from 12,000 in October. Unemployment is expected to tick up to 4.2% from the prior 4.1%. A reading of 195,000 would likely be considered healthy but watch for possible revisions to the October data as the initial report had a very light response rate due in part to the storms and strikes.

ISM Services PMI^® is due shortly after tomorrow's open and analysts expect a strong headline reading of 55.5% for November, well above the 50% demarcation line between expansion and contraction, according to Briefing.com. That would be down just slightly from 56% in October, but still a clear indication that the services sector remains healthy. The employment section of the report could be important, as it bounced back to expansion in October following a brief September dip into contraction.

Fed speakers were prominent yesterday and included Fed Governor Christopher Waller indicating he could support a rate cut later this month, though he still wants to see key data. More Fed remarks are on tap, including a conference Wednesday that will feature Chair  Powell participating in a moderated discussion. The Beige Book, which summarizes economic conditions in the Fed's 12 districts, will be released tomorrow afternoon.

Waller's words yesterday might have had an impact on futures trading, which now prices in much higher odds of a 25-basis point rate cut at the Fed's meeting.

In total, there are a combined 12 Fed speakers and Fed communications on the way before the end of the week, which could put the market on its toes. To some extent, however, those Fed speakers are performing without an up-to-date script, because, like the rest of us, they don't know what Friday's job numbers will reveal or the outcome of next week's November inflation data.

Earnings return today with $DJI member Salesforce (CRM) on tap after the close. Last time out, the software company beat analysts' quarterly expectations and raised its full-year profit outlook. Shares, which had languished most of 2024 up to that point, recovered to make big gains this fall. The company's AI strategy and results related to AI will probably get a close look this afternoon.

One possible headwind for many stocks yesterday and possibly as the week continues is dollar strength. The greenback climbed yesterday and remains near recent two-year highs partly due to U.S. economic strength but also in reflection of possible fiscal policy under the new administration next year. A strong dollar can hurt earnings for companies that sell products overseas, with sectors like tech, health care, industrials, and materials possibly seeing the negative impact.

Lululemon (LULU) and Foot Locker (FL) are among other firms sharing earnings in coming days, and Marvell Technology (MRVL) reports later today.

Spending during the five-day period from Thanksgiving through Cyber Monday is expected to reach $40.6 billion, Adobe said according to Bloomberg, up 7% from last year. This could support consumer discretionary stocks.

Stocks on the move:

• U.S. Steel (X) melted down more than 7% ahead of the open. This came as President-elect Trump expressed opposition to Nippon Steel's proposed purchase of the steel maker for $15 billion. This comes after President Biden opposed the deal.
• Applied Materials (AMAT) added 0.6% in pre-market trading. The firm reaffirmed guidance for the first quarter of 2025 and said new U.S. export restrictions on export regulations for semiconductor technology hasn't changed its quarterly outlook.
• Honeywell (HON) fell nearly 1% before the open after cutting its sales and earnings guidance. This comes as Honeywell signed a $17 billion commercial agreement with jet maker Bombardier (BBD) to provide technology for its jets, Barron's reported. The changes to guidance reflected that deal, rather than any change in Honeywell's underlying business.

Monday in review: The market "melt-up" stretched into the new month, sending two major indexes to fresh record highs led by surging tech stocks.

Mega caps wore their rally caps Monday as Apple (AAPL) recorded a new all-time peak and Tesla (TSLA) gains accelerated. Meta Platforms (META), Microsoft (MSFT), Alphabet (GOOGL), and Amazon (AMZN) also posted gains of 1% or more while semiconductors rode a wave of buying. Though tech and communication services, dominated by mega caps, did the heavy lifting for index rallies, most sectors actually fell.

Around the market in 90 seconds: Join Schwab Chief Global Investment Strategist Jeffrey Kleintop in his weekly market outlook to find out what he's focusing on in coming days.

Early today, futures traders built in a 73% chance rates will fall 25 basis points at the FOMC meeting December 17–18, based on the CME FedWatch Tool. Chances of a pause are 27%. The rate cut chances are up from around 65% at the end of last week and as low as 50% at times last month.

Ideas to mull as you trade or invest

Talking technicals: Though the market is at or near all-time highs, momentum readings don't point toward overbought conditions. This could reflect that the uptrend has been more of a grind, or "melt-up," rather than a sharp and sudden climb. Investors worried about possible thin air might want to keep their eye on the Relative Strength Index (RSI), a momentum indicator that currently is near 67 for the SPX. A reading of 70 or above might indicate the market getting over its skis. If RSI declines, it could hint at a possible correction. Technical support for the SPX is seen near 6,000.

Tail wagging: Though this week's focus is mainly on near-term events including jobs data and Fed speakers, longer-term news is likely to continue having an outsized impact on Wall Street thanks in part to the coming changeover in Washington, D.C. "We live in a world where the 'tails' of probabilities (events that occur at the tail ends of a normal distribution curve) need to be assessed," said Schwab's Chief Investment Strategist Liz Ann Sonders and Director, Senior Investment Strategist Kevin Gordon in a recent analysis. "The tails in the current environment are arguably 'fatter' than what might normally be the case, meaning there could be outsized downside and/or upside risks associated with policy-related decisions."

Decisions, decisions: The Fed enters the eye of the storm later this month, and it will be accompanied there by global central banks in a last round of meetings before 2025. "Central banks in Canada, Switzerland and the Eurozone could cut by 50 basis points this month," said Michelle Gibley, director of international research at the Schwab Center for Financial Research. "The European Central Bank (ECB) has been the source of the most uncertainty, and a 50-basis point cut would be counter to its traditional hawkish bias. The Eurozone consumer price index (CPI) has recently ticked higher, but this is expected to be a short-term occurrence. Meanwhile growth has slowed and there is increasing concern that inflation in the Eurozone could overshoot to the downside, increasing the case for a 50-basis point cut at some point in coming meetings. The next rate hike by the Bank of Japan (BoJ) could happen this month or next, and Governor Ueda’s warning that a hike is nearing is strengthening the yen."

December 4: ISM Services PMI, ADP employment change, and expected earnings from Campbell Soup (CPB), Chewy (CHWY), Foot Locker (FL), and Hormel (HRL).

December 5: October trade balance, October factory orders, and expected earnings from Dollar General (DG), Hewlett Packard Enterprise (HPE), lululemon (LULU), Petco (WOOF), and Ulta Beauty (ULTA).

December 6: November nonfarm payrolls, University of Michigan Preliminary December Consumer Sentiment.

December 9: October final wholesale inventories, November consumer inflation expectations, and expected earnings from Toll Brothers (TOL) and MongoDB (MDB).

December 10: Third quarter productivity and unit labor costs and expected earnings from AutoZone (AZO).