S&P drifts in holiday-shortened week
US stock index futures were little-changed in early trade this morning. This follows a strong session on Monday which brought a fresh record close for the Dow, and a new intra-day high for the Russell 2000. The S&P and NASDAQ also posted gains for the session. But all four majors pulled back from the pre-open highs made by their respective front-month futures contracts. The gains came as investors continue to react to the Presidential Election and to Trump’s victory. Investors expect a strongly business-friendly administration, promising deregulation and tax cuts. And in contrast to the apparent chaos and disorganisation in the wake of Trump’s first election win, this time his picks for senior political appointments have been timely, and greeted positively, on the whole. Undoubtedly, markets were bulled up by the choice of Scott Bessent as Treasury Secretary, given his successful career as a leading hedge fund manager. Mr Bessent brings with him a ‘Rule of Three’, whereby he intends to: cut the budget deficit by 3% by 2028, push real GDP growth to 3% and work to boost oil output by 3 million barrels per day. US Treasury bonds soared on news of Mr Bessent’s appointment, with the 10-year yield dropping around 14 basis points. Despite this, there are concerns over Trump’s threatened trade tariffs. Yesterday, the president-elect named China, Mexico and Canada as his big three targets for tariffs, which between them account for around 40% of US imports. With all the majors pulling back from yesterday’s highs, the S&P 500 is trading below 6,000 once again. Investors will want to see bullish momentum pick up ahead of the Thanksgiving holiday on Thursday. But it’s worth noting that the probability of another 25 basis point rate cut from the Fed at its December meeting continues to fall. This shouldn’t be too much of a surprise given that the Dow alone is up close to 8% in less than two weeks, that Fed Chair Powell has said there’s no rush to cut rates further, and that inflation has turned higher. Tomorrow there’s an update on the Fed’s preferred inflation measure, Core PCE. Today sees the release of FOMC minutes and the Conference Board’s Consumer Confidence number.
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