DJIA CROSSES 30,000 AS THE VALUE AND SMALL-CAP NAMES DRIVE MARKETS HIGHER DURING THANKSGIVING WEEK AND IN NOVEMBER

• Investors had a lot to be thankful for during Thanksgiving week, as all of the major U.S. indices moved up and many of them crossed purely psychological point-thresholds
• The DJIA moved up 2.2% and crossed 30,000 for the first time in history, before pulling back at the end of the week
• The small-cap Russell 2000 leapt 3.9%, the S&P 500 was up 2.3% and NASDAQ jumped 3.0% while crossing 12,000
• Even the developed, international markets, as represented by MSCI EAFE, moved up on the week, while crossing the 2,000 point threshold and moving into positive territory for YTD
• On the week it was the value and smaller-cap names that drove the markets, as evidenced by the Energy sector leaping 8.5% and Financials leaping 4.6%
• Of the 9 other S&P 500 sectors, only one was negative, as Real Estate lost 0.4% on the week
• There were a number of positive data sets released on the week, including GDP growth, New Home Sales, Durable Goods Orders and Consumer Confidence, as well as more positive news in the fight against COVID
• The COVID news of the week was that AstraZeneca and the University of Oxford said their vaccine was 90% effective and could be transported at normal temperatures, while Regeneron Pharma received emergency use authorization from the FDA for its antibody
• The price of oil leapt 7% on the week and ended north of $45/barrel
• The 10-year yield Treasury note yield inched higher to 0.85% as the bond market was closed the day after Thanksgiving 

The DJIA Crosses 30,000

As investors gathered around the virtual Wall Street table to share what they’re thankful for, at the top of the list was this week’s and month’s stock market performance. This week, as was the case last week too, saw positive coronavirus-vaccine news driving the market forward, as the DJIA crossed 30,000 points for the first time in its history and is up over 12% so far this month (with one trading day left). In fact, if Monday is a flat day in the stock market, the DJIA might post its best monthly gain since January 1987.

But wait, there’s more: the S&P 500 and Russell 2000 both posted fresh record highs this week too. Consider that:

• The S&P 500, DJIA, and NASDAQ are all up in double-digits so far in November (between 11 – 13%);
• The small-cap Russell 2000 is up 20% in November; and
• The Energy sector, having been beaten down for so long, is now up a staggering 34% this month.

Equity investors probably did not want the momentum halted for the Thanksgiving Day holiday, but it did, and the markets were mixed on the half-day of trading on Friday.

Looking at the week’s economic reports, it was mostly positive, although there were some negative reports too. On the negative side, Jobless Claims increased by 30,000, which was above what most expected and Consumer Sentiment was less-than-great in the short-term. On the positive side, GDP for the third quarter remained high at 33.1% annual growth, new home sales continued to impress, and durable goods orders were up 1.3%.

Third Quarter GDP Up 33.1%

On the day before Thanksgiving, the U.S. Department of Commerce released the second estimate of real gross domestic product for the third quarter. While there were changes within its components, the second estimate remained at 33.1%, which is on the heels of the 31.4% decrease in the second quarter.

According to the Bureau of Economic Analysis (within the Department of Commerce): “With the second estimate, upward revisions to nonresidential fixed investment, residential investment, and exports were offset by

downward revisions to state and local government spending, private inventory investment, and personal consumption expenditures. Imports, which are a subtraction in the calculation of GDP, were revised up.

Thanksgiving Earnings?

The third quarter earnings season is over, and it was reported that the S&P 500 companies in aggregate saw a year-over-year decline in earnings of -6.3% Q3. But, research firm FactSet released its analysis of the industries within the S&P 500 and found that if only three industries were excluded – among the 63 in total – then the S&P 500 would be reporting earnings growth of 4% for Q3.

Here is what FactSet reported:

• There are 63 industries within the S&P 500.
• Of these 63 industries, 27 are reporting a year-over-year decline in earnings for the third quarter.
• However, 36 are reporting year-over-year growth in earnings for the third quarter.

The index is reporting a year-over-year decline in earnings because three industries are reporting unusually large year-over-year declines in earnings for the quarter. These three industries are the Oil, Gas, & Consumable Fuels industry, the Airlines industry, and the Hotels, Restaurants, & Leisure industry.

• The Oil, Gas, & Consumable Fuels industry is reporting the largest (year-over-year) decline on a dollar-level basis (-$14.3 billion) and the third-largest (year-over-year) decline on a percentage basis (-113%) of all 63 industries.
• The Airlines industry is reporting the second-largest (year-over-year) decline on a dollar-level basis (-$13.0 billion) and the largest (year-over-year) decline on a percentage basis (-313%) of all 63 industries.
• The Hotels, Restaurants, & Leisure industry is reporting the third-largest (year-over-year) decline on a dollar-level basis (-$9.7 billion) and the second-largest (year-over-year) decline on a percentage basis (-133%) of all 63 industries.

Consumer Confidence Mixed

Every month, the Conference Board, in conjunction with Nielsen, compiles a survey of consumer attitudes on the economy in order to create its Consumer Confidence Index, which captures “consumers\’ perceptions of current business and employment conditions, as well as their expectations for six months hence regarding business conditions, employment, and income.”

From the release dated November 23^rd:

• The Conference Board Consumer Confidence Index declined in November, after remaining relatively flat in October.
• The Index now stands at 96.1 (1985=100), down from 101.4 (an upward revision) in October.
• The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – decreased slightly from 106.2 to 105.9.
• The Expectations Index – based on consumers’ short-term outlook for income, business, and labor market conditions – declined from 98.2 in October to 89.5 this mont

Sources:  bea.gov; conference-board.org; factset.com; fidelity.com; Nasdaq.com; wsj.com; Morningstar.com