Stocks Join Bonds Higher on Trump’s Treasury Pick: Markets Wrap

This content was published on November 25, 2024 - 22:19

7 minutes

(Bloomberg) — Stocks climbed with bonds while the dollar fell as traders welcomed Donald Trump’s pick of Scott Bessent for Treasury Secretary, betting the hedge-fund manager will bring a Wall Street mindset to the role.

The S&P 500 briefly topped 6,000 before paring gains. Small caps with typically domestic operations closed within a striking distance of their all-time highs. Treasuries rallied across the US curve, with the move led by longer maturities. Bitcoin slipped after a surge toward $100,000 fizzled just shy of the historic level. Oil sank as Israel moved closer to a cease-fire with Hezbollah.

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Markets kicked off the week with a risk-on tone as Bessent has deep familiarity with global financial systems — a trait that made him palatable to investors. And while he’s indicated he’ll back the president-elect’s tariff plans and fight to extend Trump’s tax cuts, Bessent isn’t known as an ideologue, spurring Wall Street expectations that he will prioritize economic and market stability over scoring political points.

“Investors are viewing this nomination as one that will provide a Goldilocks scenario for Mr. Trump’s pro-business proposals,” said Matt Maley at Miller Tabak + Co.

The S&P 500 rose 0.3%. The Nasdaq 100 added 0.1%. The Dow Jones Industrial Average climbed 1%. Big techs were mixed, with Amazon.com Inc. rallying while Nvidia Corp. and Tesla Inc. pushed lower. Macy’s Inc. sank after delaying its earnings as an investigation revealed a worker his millions in expenses.

The yield on 10-year Treasuries declined 14 basis points to 4.26%. The Bloomberg Dollar Spot Index fell 0.5%.

After underestimating the stock market’s strength over the past two years, Wall Street strategists are back to their bullish ways, walking a well-trodden path when it comes to their predictions for where the S&P 500 will go in 2025.

Year-end targets from firms including Goldman Sachs Group Inc., Morgan Stanley, and BMO Capital Markets fall near the 6,600 line. The level represents an advance of about 11.7% from Friday’s close, which happens to be the index’s average full-year gain going back to 1928, taking into account some adjustments.

A year-end rally will push the S&P 500 to 6,200 points, according to Goldman Sachs Group Inc.’s Scott Rubner. Retail euphoria is accelerating just as stocks enter their best seasonal trading pattern. Corporate demand for buybacks is also increasing, adding to the reasons why the rally could start in the coming days, Rubner said in a note to clients on Friday.

At RBC Capital Markets, Lori Calvasina says the S&P 500 is set to reach the 6,600 level by the end of 2025 due to what’s likely to be another year of solid economic and earnings growth, some political tailwinds, and additional relief on inflation.

Her team’s new price target “does bake in the idea that the S&P 500 will experience a 5-10% drawdown before too long.” Elevated positioning, recent froth in sentiment, and higher valuations leave the S&P 500 vulnerable to bad news and perhaps simply in need of a breather.

And Barclays Plc strategists expect further stock-market upside in 2025 amid constructive positioning and a solid macroeconomic backdrop, even though gains are set to slow from the breakneck pace seen this year and last.

The team led by Venu Krishna raised its S&P 500 year-end target to 6,600 from 6,500.

Historically, the S&P 500 has posted a median return of 5% from Election Day in November to the end of the year, according to data compiled by Deutsche Bank AG.

But this is hardly a classic election year. The S&P 500 is up over 25% in 2024 after leaping 24% in 2023, putting the index on pace for its first back-to-back years of more than 20% gains since the late 1990s. As a result, share prices are high, with the S&P 500 trading at more than 22 times projected 12-month earnings, compared with an average reading of 18 in the last decade. And positioning data shows traders are already heavily invested in equities.

While the S&P 500 might be a long way away from fumbling a strong year, don’t get too optimistic about a strong, smooth finish to the year, according to Callie Cox at Ritholtz Wealth Management.

“Yields show that expectations have moved a lot over the past two months, yet we haven’t seen any sustained, clear momentum in economic data,” Cox said. “December could be a reality check for people convinced that the economy is firing on all cylinders again.”

“Investors are especially upbeat right now, too. We all love a good collective mood before the holidays, but I’m worried we could get caught off guard by bad news,” she concluded.

US inflation figures this week that are seen showing stubborn price pressures will reinforce the Federal Reserve’s cautionary posture toward future interest-rate cuts.

The personal consumption expenditures price index excluding food and energy — the Fed’s preferred measure of underlying inflation — is projected to have risen by 0.3% in October from September, and by 2.8% from a year earlier, in what would be the largest advance since April.

Fed Bank of Chicago President Austan Goolsbee told Fox Business he foresees the central bank continuing to lower rates toward a stance that neither restricts nor promotes economic activity.

Key events this week: