Michael Huber 
Wall Street bulls mounted a valiant effort and pushed the stock market sharply Friday on a double dose of encouraging news. But the rally was not enough to overcome Wednesday’s Fed-driven plunge. The S & P 500 dropped for the second straight week, losing 2%, while the Dow Jones Industrial Average made it three down weeks in a row, with a loss of more than 2.2%. The Nasdaq posted a 1.8% weekly decline, breaking a four-week winning streak. Looking under the hood of the S & P 500, all sectors closed lower for the week, despite Friday’s rally. Energy was the worst-performing sector followed by real estate and materials. Investors got several important updates this week that influenced markets — the most consequential being the Fed’s 25-basis-point interest rate cut at the conclusion of its December two-day meeting on Wednesday afternoon. While the move was largely expected, the market took issue with the monetary policy committee’s more hawkish outlook on rate cuts in 2025. The so-called dot plot, which illustrates central bankers’ future rate expectations, pointed to a committee consensus that it will be appropriate to reduce rates only twice next year, half the number of moves indicated back in September. There is no denying that rate expectations are important, but we would caution Club members from allowing updates like this to weigh on investment decisions too heavily. While we now know who will sit in the White House come Inauguration Day on Jan. 20, and have since received more updates on inflation and the job market, nobody truly knows what 2025 will bring. There will be countless updates on inflation, rates, geopolitics, and more over the coming months, some of which we can see coming and some that will completely surprise us. The Fed, as it has been and as it should, will adjust its outlook accordingly. While we certainly don’t want to fight the Fed, we also don’t want to let every word out the mouth of a Fed official have us running to our brokerage account and making sweeping changes to our exposure. Rather, as long-term investors, we have the luxury of knowing that when the market might overreact to updates from the Fed or any other event, it can provide us with opportunities to buy shares in great companies with staying power. This is exactly what we did last week as the market got more and more oversold, according to our trusted S & P 500 Short Range Oscillator . In other words, keep focused on the fundamentals and use the volatility to your advantage. The other big update came Friday, with the cooler-than-expected personal consumption expenditures (PCE) price index, the Federal Reserve’s favorite inflation gauge. Headline November PCE showed a 2.4% increase versus the 2.5% gain expected. Core PCE, excluding volatile food and energy prices, rose 2.8% year over year versus the 2.9% increase expected. .DJI .SPX,.IXIC 5D mountain 2024-12-14 Dow, S & P 500, Nasdaq performance last week While still above the Fed’s 2% target inflation rate, the PCE data was just what the oversold market needed, and it was off to the races, turning sharp premarket losses into a powerful Friday rally. Helping the market take another leg higher, Chicago Fed President Austan Goolsbee told CNBC in a Friday interview that “rates come down a fair bit more” if the economic conditions over the last 18 months continue over the next 12 to 18 months. Goolsbee’s comments soothed a nervous market following Wednesday’s hawkish remarks from Fed Chairman Jerome Powell in his post-meeting news conference. Not to mention, if rates do remain higher for longer, that’s not exactly a bad thing as it almost certainly means that the economy is still growing, and we would much rather be in a market contending with high rates because the economy is strong than a market benefiting from low rates because the economy is struggling to avoid a recession. In other economic news last week, November retail sales came in mixed, with the headline number outpacing expectations. The results, however, were short when stripping out automotive and gasoline sales. November’s industrial production and capacity utilization were short versus expectations. The third and final read on third-quarter gross domestic product was better than estimates. On the release, the Bureau of Economic Analysis said the update GDP, measuring U.S. economic activity, “primarily reflected upward revisions to exports and consumer spending that were partly offset by a downward revision to private inventory investment. Imports, which are a subtraction in the calculation of GDP, were revised up.” November housing starts disappointed, but November existing home sales edged out expectations. Within the portfolio, no companies reported earnings, however, we did initiate a new position in Goldman Sachs while trimming and downgrading Morgan Stanley to a 3 rating . As noted in Thursday’s trade alert , we started making the switch because Goldman Sachs’ exposure to investment banking is much more significant than Morgan Stanley’s exposure — and if capital markets activity accelerates over the next few years as many analysts expect, we’ll want to be invested with the highest quality investment bank. We also opted to trim and downgrade our position in Advanced Micro Devices to our 3 rating. While initially thinking AMD would prove a winner as it provides alternatives to Club name Nvidia , what we’re seeing now is that Nvidia is even more deeply entrenched than we thought and when companies do look for alternatives, they’re more so focused on custom chip solutions, like those made by Broadcom and Marvell Technology , than they are on general GPU alternatives. While we like Broadcom for the long haul, we did trim and downgrade the stock after it went parabolic after strong earnings the prior week. Looking ahead, it will be a light week with the stock market closing at 1 p.m. ET on Tuesday and closing all day on Wednesday for Christmas Day. That said, November new home sales are out Tuesday. Housing reports have been and will continue to be a key watch item for investors given that shelter cost inflation has proven extremely sticky and a key source of upward pressure on inflation, which is in turn keeping rates elevated. However, investors should take any positive update from Tuesday’s report with a grain of salt. Mortgage rates rebounded following the Fed’s rate announcement on Wednesday, and investors are going to be far more focused on figuring out what that means for home sales and affordability going forward than what’s in this backward-looking release. Week ahead Monday, Dec. 23 10 a.m. ET: Consumer confidence Tuesday, Dec. 24 8:30 a.m. ET: Durable goods orders 10 a.m. ET: New home sales U.S. stock market closes at 1 p.m. ET Wednesday, Dec. 25 U.S. stock market closed for Christman Day Thursday, Dec. 26 8:30 a.m. ET: Initial jobless claims Friday, Dec. 27 8:30 a.m. ET: Wholesale inventories (See here for a full list of the stocks in Jim Cramer’s Charitable TrusT.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Wall Street bulls mounted a valiant effort and pushed the stock market sharply Friday on a double dose of encouraging news. But the rally was not enough to overcome Wednesday’s Fed-driven plunge.
