Resilience continues to define the U.S. economy, as highlighted by the latest economic data. The S&P Global US Composite PMI rose to 55.3 in November, marking the fastest business activity expansion since April 2022. The Services PMI also surged to 57.0, exceeding expectations and reinforcing the economy’s strength. However, manufacturing remains a concern, with the PMI stuck at 48.8, indicating contraction.
Housing markets showed resilience, with existing home sales rebounding 3.5% month-over-month in October, marking the first year-over-year increase since mid-2021. Labor market data added to the positive narrative, as Initial Jobless Claims dropped to 213,000, the lowest level since April. Continuing Claims, however, rose slightly, signaling ongoing challenges for some sectors.
Treasury Yields and Fed Policy Reflect Resilience
Treasury yields revealed resilience in market sentiment, with two-year yields climbing to a three-month high of 4.36%. In contrast, longer-term yields remained steady, reflecting cautious optimism. The Federal Reserve’s policy outlook has shifted, with the probability of a December rate cut now at 55%, down from 58% last week and sharply lower than 92% a month ago. Markets now anticipate only 50-75 basis points of cuts through 2025, significantly less than earlier projections.
Stock Market Outlook for the Week
This week, the stock market will test the economy’s resilience as new data, including consumer sentiment and durable goods orders, is released. Investors will also pay close attention to holiday shopping trends, which could influence retail and consumer discretionary sectors.
The ongoing strength in services and housing, coupled with moderated Fed policy expectations, may provide a foundation for steady market performance. While manufacturing struggles persist, the broader economic narrative suggests resilience will remain the defining theme for the stock market this week.
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