Stock Market Analysis for December 7, 2024

As we begin the week on December 7, 2024, the U.S. stock market faces notable impacts from recent global economic and policy developments. The Federal Reserve’s latest interest rate decision, along with strong employment data and rising inflation concerns, have been significant factors influencing market sentiment in recent days.

Key Events Impacting the Market

1. Federal Reserve Rate Hike Announcement: The Fed raised interest rates by 25 basis points last week, marking the eighth hike this year as part of its ongoing fight against persistent inflation, which has remained above their 2% target. Investors are now evaluating the impact of this increase on economic growth and consumer spending.
2. Strong Employment Data: The U.S. economy added 250,000 jobs in November, exceeding analysts' expectations. The unemployment rate remains at a historically low 3.5%. Positive job growth signals strengthen the case for higher sustained interest rates, which can create volatility in sectors sensitive to borrowing costs.
3. Oil Prices Surge: Global oil prices have been climbing due to renewed supply concerns amid geopolitical tensions in the Middle East. This has led to a spike in energy stocks, but also raises concerns about the potential for increased inflation.

Weekly Market Overview

The S&P 500 closed the previous week down by 2%, primarily driven by fears of prolonged high rates impacting growth stocks. However, sectors such as energy and financials witnessed a rally, providing a mixed outlook for the overall market.

Upcoming Events to Watch

• CPI Inflation Data Release: Scheduled for December 10. This will be the next key economic data point investors will scrutinize to gauge inflationary pressures and the Fed’s following steps.
• Earnings Reports: Some big-name tech companies will report earnings in mid-December, which could significantly impact market sentiment and stock valuations.

Recommendations for Today’s Market Open

BUY:

• XLE (Energy Select Sector SPDR Fund): Continued high oil prices and demand for energy suggest it’s a good time to enter this sector.
• VFH (Financials Select Sector SPDR Fund): With bank stocks traditionally benefitting from higher interest rates, this ETF could perform well as the economy adjusts to new rates.

SELL:

• ARKK (ARK Innovation ETF): Given the recent pressure on growth stocks due to increased rates, this ETF focused on disruptive innovation might see further declines.

As investors prepare for the opening bell, maintaining a balance between defensive positions and taking advantage of sectors poised for growth amid economic changes may be crucial for a successful investment strategy.