What Do Falling Bonds, Rising Indexes, and Macy's Trouble Have in Common?

U.S. stock markets closed higher on Monday, with the Russell 2000 small-cap index hitting an all-time high. The optimism was boosted by the nomination of Scott Bessent to be U.S. Treasury Secretary, which helped push Treasury yields lower.

Oil prices have fallen amid ceasefire talks between Israel and Lebanon. This has had a negative impact on the energy sector, with the Energy Index (.SPNY) falling 2%. Market participants have reacted to the potential easing of tensions in the Middle East, which has increased pressure on the quotes of "black gold".

President-elect Donald Trump on Friday evening finally named his nominee for Treasury Secretary, ending weeks of anticipation. The appointment of Scott Bessent has caused a stir in the markets, as some analysts believe he can limit the growth of the national debt, even while delivering on Trump's promises in the field of fiscal and trade policy.

Experts note that Bessent's appointment has reduced investor anxiety about the possible introduction of new tariffs, which previously caused jumps in bond yields.

"The focus is now on trade policy. "The nomination of Scott Bessent has significantly eased key fiscal concerns," said James Reilly, chief market economist at Capital Economics.

Markets continue to closely monitor the appointments and statements of the new administration, awaiting further signals on the course of economic policy.

The leading US indices ended the day higher, demonstrating resilience even in the face of increased volatility. The S&P 500 added 17.81 points (+0.30%), ending the day at 5,987.15 points. The Nasdaq Composite also strengthened, rising 51.50 points (+0.27%) to 19,055.15. But the blue-chip index, the Dow Jones Industrial Average, showed the most confident dynamics, increasing by 439.02 points (+0.99%) and reaching 44,735.53.

The dynamics on the New York Stock Exchange (NYSE) turned out to be extremely positive: the number of growing stocks was more than three times higher than the number of those that closed in the red (ratio 3.01 to 1). In addition, the market demonstrated an impressive indicator of new highs - 836 were recorded, while there were only 40 lows.

The Russell 2000 small cap index confidently rewrote its own record set three years ago, reaching an intraday maximum of 2,466.49 points. The rally was driven by a sharp decline in Treasury yields, especially 30-year yields, which led the decline among all maturities.

"Small- and mid-cap stocks that have been in the shadows for a long time are now seeing solid gains, not just because of Trump's policies but also because of the Federal Reserve's rate-cutting approach," said Adam Sarhan, CEO of 50 Park Investments.

Promises from Trump and the Republican Congress to create a more favorable business climate continue to fuel investor optimism. Small-caps are particularly beneficial in this environment, as the Fed's easing cycle launched in September has helped boost their appeal.

As markets await confirmation of key economic initiatives from the new administration, the results so far suggest that small-caps are entering a new era of growth, becoming the focus of investors.

Lower Treasury yields have helped the rate-sensitive Real Estate sector (.SPLRCR), which has posted strong gains. The Housing Index (.HGX) has followed suit, adding a healthy 4.5%. This trend reflects growing investor interest in sectors sensitive to interest rate movements.

Analyst optimism continues to fuel the market: Barclays raised its S&P 500 forecast for 2025, and Deutsche Bank set an ambitious target of 7,000 points by the end of the same year. However, not everything is so smooth - investors remain wary due to the risk of increasing inflationary pressures, which could complicate further easing of the Federal Reserve (Fed).

Markets remain awaiting the December Fed meeting, where a decision on further rate adjustments may be made. According to the FedWatch tool from CME Group, the probability of a 25 basis point rate cut is estimated at 56.2%. Investors are wavering between expectations of a pause and hopes for a continuation of the rate-cutting cycle, which is creating volatility in the market.

The consumer sector was the engine of growth, led by a 2.2% gain in Amazon.com shares. However, not all companies were able to please investors.

Macy's disappointed the markets, falling 2.2% after delaying the release of its third-quarter financial results due to internal accounting issues. In contrast, Bath & Body Works pleasantly surprised investors by raising its full-year profit forecast. That led to a stunning 16.5% jump in the company's shares.

Investors will focus on the consumer spending report, a key indicator of inflation for the Federal Reserve, this week. The release is expected amid the U.S. Thanksgiving holiday, adding interest to the retail sector. It is consumption data that could provide markets with new guidance amid uncertainty.

The market remains in a state of balance between long-term optimism and current macroeconomic risks, continuing to look for growth points in an unstable environment.

The S&P 500 stock index demonstrated impressive statistics: 106 new highs over the past 52 weeks without a single low. The Nasdaq Composite did not lag behind, recording 352 new peaks and 66 new lows. This indicates a strong bullish mood in the market, supported by positive news and investor optimism.

American exchanges showed high activity: the trading volume amounted to 16.69 billion shares, significantly exceeding the average of the last 20 trading days, which amounted to 14.93 billion shares. The increase in transaction volume indicates market participants' confidence in favorable prospects.

On the international stage, the MSCI Global Stock Index rose, while US Treasuries strengthened their positions. The dollar, on the other hand, declined, which was caused by a positive reaction to the choice of the new US Treasury Secretary – investors approved the candidacy of fund manager Scott Bessent.

US stock indices ended trading on the rise, with the S&P 500 and Dow Jones setting intraday records. This rise is associated with investors' hopes for tax breaks and fiscal caution from the future head of the Treasury.

Donald Trump's choice confirmed his desire to build a management team that is simultaneously focused on stimulating business and containing public debt. This became a signal to markets about a possible reduction in uncertainty.

US Treasury yields fell sharply. Market participants expect the new administration's fiscal policy to be more moderate than previously forecast. This has allowed investors to shift their focus to longer-term assets, strengthening bond positions.

Markets are showing cautious optimism in response to key policy decisions. Market participants continue to hope that the vector of US economic policy will provide stability and support current growth.

Incoming Treasury Secretary Scott Bessent outlined his top priorities in an interview with the Wall Street Journal — cutting taxes and spending. In another conversation with CNBC, which took place even before his nomination, he mentioned plans to gradually introduce tariffs, which underscores his balanced approach to economic policy.

"Bessent has a deep understanding of various asset classes and will help Trump remain sensitive to market reactions," says Carol Schleif, chief investment officer at BMO Family Office. She also stressed that his appointment reassures investors who feared a tougher tariff policy that could ignore market signals.

On the global stage, the MSCI index rose by 0.45% and reached 857.97. The European STOXX 600 index also ended the day in the green, albeit with a slight increase of 0.06%. These data indicate positive sentiment in global markets, supported by news from the United States.

This week, shortened in the United States due to the Thanksgiving holiday, market participants will focus on several important reports:

Despite some restraint in recent weeks, traders are hoping for a cut in the interest rate in December. The move could support markets amid macroeconomic uncertainty, bolstering investor optimism.

As Bessent prepares for his new role, his statements and economic plans set the tone for market sentiment. Investors can look forward to key data as well as signals about how flexible and pragmatic the new US economic policy will be.

The US Treasury market started the week with a noticeable decline in yields. The yield on the benchmark 10-year note fell 14.1 basis points to 4.269% from 4.41% on Friday. A similar trend was seen in the 30-year segment, where the yield fell 13.9 basis points to 4.4562%.

Two-year notes, which are more sensitive to interest rate expectations, also showed a decline. Their yield fell by 10.5 basis points, ending the day at 4.264%, compared to 4.369% on Friday.

Amid growing expectations for easing by the Federal Reserve, the dollar index, which tracks the dollar against a basket of major currencies, fell by 0.56%, reaching 106.89 points.

The euro exchange rate rose confidently by 0.74%, reaching $1.0494. The dollar also weakened against the Japanese yen, falling by 0.37% to 154.16 yen per dollar. This decline reflects cautious market participants' expectations about the Fed's further actions.

The dynamics of bond yields and the weakening dollar indicate that investors' expectations are shifting towards a more accommodative monetary policy. In the coming days, the key drivers of the market will be the release of economic data and upcoming comments from the Federal Reserve.

Oil prices have fallen sharply by more than $2 per barrel amid news that Israel and Lebanon have reached an agreement to resolve the conflict involving the Hezbollah movement. Sources in Israel, Lebanon, the United States and France confirmed the agreement, which caused a wave of reaction in energy markets.

US crude futures ended the day down 3.23%, losing $2.30 and stopping at $68.94 per barrel. This decline is due to expectations of a decrease in geopolitical risks, which traditionally support high prices for raw materials.

The European oil benchmark, Brent, was also under pressure. The price fell by 2.87%, equivalent to a drop of $2.16, to $73.01 per barrel on the day.

The agreement reached between Israel and Lebanon has eased concerns about possible disruptions to oil supplies from the region. As geopolitical tensions ease, the risk premium embedded in oil prices tends to decrease.

The drop in oil prices could signal a reassessment of global risks, especially if stability in the Middle East region continues in the long term. However, markets are watching closely to assess the sustainability of these changes.

The world's leading cryptocurrency, Bitcoin, has fallen more than 2% to $94,811.03 after an impressive rise to $99,830 on Friday. Investors who expected favorable regulation of the crypto sector under the Trump administration have adjusted their expectations, which is the main reason for the current decline.

Gold prices fell sharply, ending a five-week rally. Positive news about a possible ceasefire between Israel and Hezbollah, coupled with the appointment of Scott Bessent as Treasury Secretary, undermined demand for the precious metal as a safe-haven asset.

Spot gold lost 3.14% to $2,627.27 an ounce;

U.S. gold futures fell 2.56% to close at $2,640.40 an ounce.

Bessent's appointment, in addition to its impact on gold, triggered a massive influx of capital into Treasuries, pushing down their yields. Against this backdrop, the dollar showed mixed dynamics.

The dollar strengthened 2% to 20.679 Mexican pesos and rose 1% to 1.4130 Canadian dollars;

In offshore trade, the U.S. currency rose 0.3% to 7.2681 yuan;

Against the Japanese yen, the dollar rose 0.14% to 154.43 yen, while the euro weakened 0.5% to $1.0444.

The rise of the Canadian dollar against the Mexican peso has raised concerns among investors who believe that such a move could negatively affect the Mexican economy.

Amid the strengthening dollar, the pound sterling fell 0.35% to $1.2526. The Australian dollar suffered more significant losses, falling 0.8% to $0.6453.

Asian stock markets ended the day in the red, showing weakness after recent records. Australia's index (.AXJO) slipped 0.36%, not holding on to the gains made the previous day.

Japan's Nikkei (.N225) lost 1.3%, extending its downward trend amid persistent volatility. South Korea's KOSPI (.KS11) also fell, down 0.4%, reflecting overall tensions in regional markets.

S&P 500 futures were down 0.3%, offsetting the overnight gains in the cash index by the same amount. However, on the positive side, the Russell 2000 small-cap index (.RUT) once again hit a new all-time high during the previous session, demonstrating the resilience of smaller companies.

Donald Trump made a big statement, announcing the introduction of tough trade measures from the first day of his presidency. Among them:

Trump's statements add to the uncertainty in global markets, raising concerns about the possible growth of trade barriers. Asian markets have already responded to this rhetoric with a decline, and investors' attention is shifting to potential retaliatory measures from China, Mexico and Canada.

Amid these events, market participants continue to closely monitor the rhetoric of the new US administration, trying to predict the consequences for global trade and the economy.