Storm on the Horizon or Calm Before the Rise? Markets Brace for Friday

Despite the overall decline in the Dow, three sectors — technology, communications services, and consumer discretionary — ended Monday with solid gains of 1% each. Tesla was the standout, jumping 3.5% as Stifel analysts raised their price target. The rest of the S&P 500 sectors declined, weighing on the broader market.

"The market is in a strong seasonal period and is gradually moving higher," said Rick Meckler, partner at Cherry Lane Investments.

The results of the recent elections turned out to be an important driver for November growth. Donald Trump, who regained the White House, along with the Republican Party's victory in both houses of Congress, became a catalyst for positive expectations. Strategists associate this with a possible tax cut and deregulation, which the market perceives as favorable measures. However, the tariff issue remains a factor of uncertainty.

Monday's results: indices are mixed

Analysts note that the growth observed in November may continue if political and economic conditions remain favorable. However, the tariff policy may become a serious test for the market.

Such a mixed start to the week only highlights the complexity of the current market situation, where optimism collides with real economic risks.

Fed Governor Christopher Waller has made it clear that he supports the idea of cutting the base interest rate at the December meeting. The reason is the continuing pressure of restrictive monetary policy. However, investors still have questions: is the progress in the fight against inflation really sustainable, or do recent macroeconomic data signal the opposite?

The Fed's plans to cut the rate by 0.25% seem logical against the background of the regulator's previous steps. Since September, the regulator has adjusted rates twice - first by 0.5%, then by 0.25%. However, fresh inflation statistics make market participants wonder whether the reserves for further easing have been exhausted.

Among the positive news is the improvement in manufacturing activity in the US. This conclusion was voiced by the Institute for Supply Management (ISM) on Monday. The growth of the indicator gives hope for the stability of the economy, despite difficult macroeconomic conditions.

Investors can expect a busy information week. On Friday, the key employment report, which is traditionally an important indicator of the state of the economy, will be released.

In addition, the following will be presented:

Each of these reports can influence the strategy of investors and further decisions of the Fed.

Shares of Super Micro Computer soared by 28.7% after news about the search for a new CFO. The decision was made based on the recommendations of a special committee engaged in the audit of the company's accounting practices. The AI server maker remains in the spotlight, demonstrating how a combination of tech breakthroughs and internal reforms can drive growth.

Recent Fed statements, economic data, and corporate events set a mixed tone. The market is looking for December to provide clarity on key issues, from monetary policy to employment. It remains to be seen whether the numbers can confirm investor optimism.

On the New York Stock Exchange (NYSE), decliners outnumbered gainers by a 1.08-to-1 ratio. Despite the overall decline, the exchange posted 406 new highs versus just 64 new lows, suggesting that there is still upside for individual stocks.

The picture was more positive on the Nasdaq, with 2,332 stocks advancing and 2,060 falling. That gave the gainers a 1.13-to-1 ratio, highlighting the strength of the tech sector.

Total trading volume on US exchanges was 13.64 billion shares, below the average of the last 20 trading days (14.74 billion). This may be due to the cautious mood of investors ahead of upcoming key economic data.

Current indicators show that the market is in a state of balance between optimism in the tech sector and restraint in traditional markets. The main movements are likely to depend on economic data and the Fed's decisions, which can affect both investor sentiment and trading volumes in the coming days.

Exchanges continue to demonstrate a fine line between the growth of individual stocks and overall instability, which leaves open the question: will the market be able to maintain the current momentum or will a correction be inevitable?

Financial markets saw mixed dynamics on Monday. In the US, stocks showed mixed results, while in Europe, investors reacted to political instability in France. France's CAC 40 (FCHI) was little changed amid volatile trading. The main reason for the tension was parliament's plans to hold a vote of no confidence in Prime Minister Michel Barnier, which could lead to the resignation of the government as early as this week.

The pan-European STOXX 600 index initially fell on the news but then recovered, ending the day up 0.66%. The result highlights the resilience of some sectors despite political instability.

The US currency strengthened against the euro amid both domestic economic data and turmoil in France. At the same time, the US economy is showing signs of recovery.

According to the latest data:

The key event of the week is expected to be the monthly employment report, scheduled for release on Friday.

On Wall Street, the tech sector was the main driver of growth. Facebook parent Meta Platforms rose 3.2%, while Amazon.com gained 1.4%. However, there was some negative news: Intel shares lost 0.5% after CEO Pat Gelsinger announced his resignation. The decision raised questions about the stability of the company's leadership, which is already struggling amid increased competition.

Markets continue to balance optimism about the U.S. economic recovery with geopolitical risks, especially in Europe. Volatility combined with the expectation of fresh data creates an atmosphere of caution, with investors remaining focused on macroeconomic cues.

The week is still young, but it is already clear that markets are bracing for new challenges and potential surprises.

The market is starting to change, with technology companies regaining the lead, and recent gains in financials and cyclicals gradually slowing, said John Belton, a portfolio manager at Gabelli Funds in New York.

Belton noted that the holiday sales exceeded expectations. Particularly noticeable growth occurred in the e-commerce sector, which showed stable dynamics and confirms the strength of consumer demand.

The American currency continues to strengthen, displacing the euro, which fell by 0.75% on Monday, reaching $1.0498. The strengthening of the dollar is associated not only with the economic dynamics of the United States, but also with political statements by Donald Trump. The new US president warned the BRICS countries against trying to replace the dollar with an alternative currency, which strengthened the position of the American currency on the international stage.

The euro has lost 14% in the past three months, with expectations of a tougher rate cut by the European Central Bank. In addition, political instability in France has pushed up the risk premium on French debt.

The yield gap between France and Germany's 10-year bonds, a key measure of financial stability, has widened by 7 basis points to 87, reflecting growing investor caution, although it remains below the 12-year high set last week.

Amid a stronger dollar, political turbulence in Europe and mixed performance across sectors, investors are focused on fresh economic data and the outlook for monetary policy. The return of tech leadership and impressive Black Friday sales are providing reasons for cautious optimism, but global economic and political uncertainty remains a key challenge.

Increasing political instability in Europe could increase market expectations for a deeper interest rate cut by the European Central Bank, according to Lee Hardman, currency strategist at MUFG. While the economic data does not fully justify a 50 basis point cut, political uncertainty is creating additional incentives for monetary easing.

Despite a challenging macroeconomic environment, global equities are showing positive momentum. The MSCI All-World Index, which measures the performance of equities around the world, rose 0.3%. This growth indicates continued optimism among investors despite local and global challenges.

The attention of traders and analysts this week is focused on the US Federal Reserve. The upcoming monthly wage report, which will be published on Friday, may become a decisive argument in deciding whether to cut the rate at the meeting on December 18.

The words of Fed Governor Christopher Waller on Monday added clarity: he believes that further rate cuts are reasonable. In his opinion, the current monetary policy remains tight enough to contain inflation, and the labor market is in a state of equilibrium, which the regulator seeks to maintain.

The probability of a 0.25% rate cut is estimated by traders at about 60%, but much will depend on the speech of Fed Chairman Jerome Powell, scheduled for Wednesday.

Markets remain in a state of heightened sensitivity to political and economic news. The ECB and Fed's decisions will determine the direction of both global indices and national currencies. In the coming days, investors will be closely monitoring comments from officials and fresh economic data, which could shape the market sentiment for the rest of the year.

The yield on the 10-year US Treasury note remained at 4.194%, which in turn supported the rise of the dollar index. The index, which reflects the strength of the American currency against six major rivals, rose by 0.33%, reaching 106.39. In November, the dollar strengthened by 1.8%, which indicates its resilience amid global economic changes.

Chinese stocks showed growth, with the CSI 300 index of mainland China rising by 0.8%. This was helped by positive results from a private manufacturing survey published on Monday, which pointed to a recovery in activity in the country's manufacturing sector.

The Japanese yen remained near a six-week peak hit on Friday, settling at 149.47, suggesting relative stability amid global currency moves.

Gold prices extended their decline, falling 0.6% to $2,637 an ounce. The stronger dollar put additional pressure on the precious metal, which ended November down more than 3%, its worst performance since September 2023.

Oil prices remained steady despite positive signs from China, where manufacturing activity is showing signs of growth. However, the market is being held back by expectations that the Federal Reserve is unlikely to cut rates again in December, limiting the upside potential for the commodity.

Bitcoin, the flagship of the crypto market, fell by 1.88% to $95,619.00. This move reflected the general uncertainty in financial markets and the influence of macroeconomic factors, including the strengthening dollar.

The stability of Treasury bonds, a strong dollar, and the expected decisions of the Federal Reserve are having a significant impact on the markets. At the same time, Asian markets are showing signs of recovery, which is creating mixed dynamics in the global economy. Investors continue to monitor global cues to assess the outlook for the end of the year.