U.S. stocks ended another week with solid gains, helped by the prospects of lower interest rates and healthy economic growth. The holiday spirit aided positive investor sentiment. The two-week gain helped turn November into the best month of the year.
The S&P 500 ended Nov. 29 at a new high of 6,032, up by 1.41 percent for the week; the Dow Jones was up 2.37 percent to another new high of 44,910; the Nasdaq was up 1.30 percent to 19,218; and the small-cap Russell 2000 gained 2.99 percent to 2,434.
For the month, the S&P 500 gained 5.73 percent, the Dow Jones gained 7.54 percent, the Nasdaq gained 6.21 percent, while the Russell 2000 was the big winner with a 10.84 percent gain.
Higher bond prices aided last week’s gains, driving yields lower. The benchmark 10-year US Treasury bond ended the week with a yield of 4.17 percent, down from 4.41 percent the previous week and 4.46 percent on Nov. 13.
They showed strong support by the committee members for a gradual cut in interest rates: “In discussing the outlook for monetary policy, participants anticipated that if the data came in about as expected, with inflation continuing to move down sustainably to 2 percent and the economy remaining near maximum employment, it would likely be appropriate to move gradually toward a more neutral stance of policy over time.”
Interest rates are a critical variable in asset valuation. Lower interest rates are positive for bonds and stocks, making future cash flows more valuable when discounted to the present.
However, investors shouldn’t get too excited about lower interest rates, as it isn’t a sure thing. The committee members reaffirmed the Fed chair’s previous comments that monetary policy decisions are not on a preset course. Instead, they are data-dependent, highlighting the significance of focusing on underlying economic trends and the evolution of the outlook when assessing incoming data.
Another positive factor for stocks was the release of data showing an acceleration in U.S. economic growth with little price pressure.
On Wednesday, the U.S. Bureau of Economic Analysis (BEA) said the final sales of domestic products in the United States rose at an annual rate of 3 percent in the third quarter of 2024, in line with the advance release made a month earlier.
That’s a big jump from the 1.9 percent rise in the second quarter, thanks to robust consumer spending, which was up at an annual rate of 3.5 percent in the third quarter of 2024 from the 2.8 percent growth in the second quarter.
Despite an acceleration in economic growth, inflation edged up only slightly. Personal consumption expenditures, the primary measure of consumer spending on goods and services in the U.S. economy, rose at an annual rate of 2.3 percent in October 2024, up from a three-year low of 2.1 percent in September, in line with expectations.
A growing economy with tamed inflation supports the FOMC’s plan to gradually cut interest rates. It is also positive for stocks, as it helps grow the top line of listed firms.
Meanwhile, the holiday spirit aided the positive sentiment fueled on Wall Street by the FOMC and the BEA. It helped ease market volatility, with the week’s Chicago Board Options Exchange volatility index down 19.92 percent.
Georgios Koimisis, associate professor of economics and finance at Manhattan University, liked the recent economic reports. “In the last two years, the U.S. economy has seen strong growth, low unemployment, and resilient consumer spending, fueled by rising incomes,” he told The Epoch Times.
However, he is concerned about the distribution of economic growth’s benefits in American society.
“Despite the economy’s strength, many Americans may not have experienced its benefits,” he explained. “Persistent challenges, such as high housing costs, uneven wage growth, and lingering inflation in essentials, have overshadowed broader economic gains. “
Still, he’s cautiously optimistic for the year ahead.
“Tax cuts are expected to boost disposable incomes and spending, while relaxed regulatory policies could encourage business investment and innovation,” he said.
“These factors may lead to even stronger growth than 2024 when combined with cooling inflation. However, challenges remain as reduced immigration could limit workforce growth, fiscal pressures may restrict public investment, and higher tariffs risk raising the cost of essential goods, hitting lower-income households the hardest.”
