Wall Street: US stocks surge led by Dow as investors eye cyclical gains amid inflation concerns

Stocks end week higher as Dow leads gains

Stocks in the United States (US) closed the week on a high note, with the Dow Jones leading the gains as investors continued to focus on cyclical stocks likely to benefit from a resilient economy. However, caution lingered in the tech sector following Nvidia's mixed earnings report.

Trump announces US Treasury secretary

In political news, President-elect Donald Trump has announced his nomination of Scott Bessent as the new US Treasury secretary.

Markets are expected to welcome Bessent’s appointment, given his track record working with hedge fund legends such as George Soros and Stanley Druckenmiller. Bessent has previously expressed a preference for tariffs to be introduced gradually.

Focus shifts to Fed minutes and inflation data

In a Thanksgiving holiday-shortened week, market attention will centre on the Federal Open Market Committee (FOMC) meeting minutes and the Fed’s preferred measure of inflation, the core personal consumption expenditures (PCE) price index.

US equities have significantly outperformed this month, leading asset allocators and pension funds to prepare for potential month-end rebalancing flows. These flows may be postponed until after Trump’s inauguration, as investors await clarity on his policies.

What the core PCE inflation report could mean for markets

Date: Thursday, 28 November at 12.30am AEDT

In September, headline PCE rose 2.1% year-on-year (YoY), slowing from a 2.3% increase in August. Meanwhile, core PCE, which excludes volatile food and energy prices, rose by 2.7% YoY, exceeding forecasts of 2.6%. This marked the first uptick in core PCE since August 2023.

For October, core PCE inflation is expected to rise 0.3% month-on-month (MoM), lifting the annual rate to 2.8% from 2.7%. This increase may fuel concerns over limited progress in curbing inflation, potentially impacting market expectations for future Federal Reserve (Fed) ineterst rate cuts.

Despite the uptick, goods inflation is expected to remain subdued, while shelter inflation is likely to continue moderating. With the labour market recovering beyond pre Covid-19 levels, wage growth is expected to fall below 3.5%, which could ease pressure on core services inflation over time.

US headline and core PCE price index chart

Nasdaq 100 technical analysis

Towards the end of last week, the Nasdaq 100 began to fill the gap lower that occurred on 15 November, a necessary step for a more sustainable rebound.

If the Nasdaq 100 continues filling the gap while remaining above last week’s low of 20,315 and medium-term support at 19,900 - 19,800, a retest and break of the 21,182-record high from earlier this month is expected, followed by a move towards 21,500.

However, a sustained break of medium-term support in the 19,900 - 19,800 range would indicate a deeper decline towards the 200-day moving average at 19,077, reinforced by trend line support near 18,800.

Nasdaq 100 daily chart

S&P 500 technical analysis

Towards the end of last week, the S&P 500 filled the gap lower from 15 November while holding above its post-election gap higher from 6 November, a bullish development.

If the S&P 500 stays above last week’s low of 5853 and medium-term support at 5700 - 5650, the uptrend is expected to resume. The initial target is the 6012-record high from earlier this month, followed by 6150. Beyond that, weekly trend channel resistance is currently at approximately 6250 - 6270.

Conversely, a break below last week’s low of 5853, followed by a sustained drop below horizontal support at 5760 - 5750, would signal a deeper pullback. This could lead to a decline towards 5520 - 5435, which includes uptrend support from the October 2023 low of 4103 and the 200-day moving average.

S&P 500 daily chart

• _{Source: TradingView. The figures stated are as of 25 November 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}